If you’re applying for a mortgage loan, make sure that your boast a high enough credit score. This number is crucial: It determines more than any other factor whether you?ll qualify for a top mortgage loan or none at all.
In just one number, your credit score tells mortgage lenders a lot about your financial past. By looking at your credit score, lenders will know whether you have a history of paying your bills on time or if you’ve missed several payments. They’ll know if you misuse your credit cards. And they?ll know if you’ve filed for bankruptcy.
If your credit score is a good one, one that is above 700, most mortgage lenders will approve you for a loan with the lowest possible interest rates. But if your score is a weaker one, though you might still receive a mortgage loan, you?ll certainly be forced to higher interest rates. Lenders do this to shield themselves from the extra risk they taken on by lending money to borrowers who have a history of missing payments.
The good news is that you can improve your credit score. The bad news is that there is no quick way to do this. You may hear radio commercials from companies that claim they can clean up your credit report instantly. Don?t believe them. Improving credit takes time and work.
The first step in this process is to order copies of your credit report from the three bureaus that maintain credit scores, Experian, TransUnion and Equifax. Scan these reports carefully, looking for any errors. If you find any, contact the bureau to report the mistake.
Having these errors erased from your report can help strengthen your credit score. The bad news, though, is that having this done is not a quick process. It will not result in an immediate change.
If you find no errors, you?ll then have to take on the real hard work: improving your own financial habits.
First, make sure to pay all your bills on time. Also, pay off the outstanding balances on your credit cares. And once you do, close most of your accounts.
Taking these steps will gradually boost your credit scores. A better score, though, won?t happen overnight. It takes time to erase bad financial habits. That?s why there?s no quick way to improve a credit score.
If your credit score is currently weak, it might make sense to wait for a year or more before applying for a mortgage loan. That will give you the time you need to establish the healthy spending habits that will boost your credit score.
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