How to Prepare Your Credit for a Mortgage
Due to COVID-19, the economic uncertainty in 2020 has resulted in historically low interest rates, which makes this a great time for many buyers to consider purchasing a new home or refinancing their current home. A strong credit score can ensure you receive the best rate possible. So, while 2020 has been an unconventional year, the ways to maintain and improve your credit remain the same. Before you buy a home or refinance, here are a few tips to help you maximize your credit score during a time with historically low rates.
- Avoid opening new lines of credit. Opening new credit cards or co-signing on a loan result in hard inquiries on your credit report, which can lower your credit score. When shopping for a home loan, it is not uncommon to have your credit pulled several times. The great news is that as long as you confine your rate shopping to a two-week period, the credit bureaus will treat the multiple inquiries as just one instance, which results in only a minor hit to your credit score. The score reduction is usually short-lived and drops off your credit report after two years.
- Keep credit card balances low. One of the factors that contributes to your credit score is how much of your available credit limit you are utilizing. Maxing out your credit cards may signal to lenders that you already have more debt than you can handle. If paying off credit cards is not an option, then try to pay down card balances.
- Avoid paying bills late or missing payments. Late or missed payments can cause dramatic hits to your credit score and possibly make you ineligible for certain loan products. Keep your credit score safe by continuing to pay your bills on time. Setting up automatic payments can help streamline this process.
- Don’t close old credit accounts. The length of time you have had a credit card also impacts your credit score. The longer you have an account open, especially one in good standing, the more it can positively affect your credit score.
For more tips to understanding credit, visit the credit page of our financial advice site.
By: Marlene Sheard
Marlene is a mortgage marketing representative for Ameris Bank and previous sales and marketing president for her local Home Builders Association. She enjoys sharing her experiences for the buying, selling, and financing of homes.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.