What you need to do before you buy a home.
Congratulations on your decision to purchase a home – how exciting! The next step is knowing your current credit score, how lenders review your credit, how to improve it if needed, and most importantly…protecting your credit!
Knowing where you stand with your credit is crucial because this can determine the amount of mortgage you qualify for as well as the interest rate and other costs associated with obtaining the loan. The higher your credit score shows lenders you are a low-risk, responsible borrower; the lower your credit score shows lenders you are a high-risk borrower, which can lead to higher fees and sometimes being declined.
If you need to improve your score, there are some steps to help:
Pay your monthly bills on time
Reduce the amount you owe by paying more than the minimum amount due: ideal balances are less than 30% of your assigned credit limit
Limit the number of inquiries on your credit
Dispute any errors on your credit report
Your lender will pull a credit report at pre-approval to make sure you are qualified to purchase, and they will run your credit again just before closing. It’s important to make sure that you do not apply for any new credit, auto loans, etc until after you close on your home - any new loans or credit card accounts on your credit report can jeopardize the closing.
Protect your credit by monitoring it monthly, add fraud alerts on your credit report, and even sign up for purchase notifications on your cards. This may all seem like an inconvenience, but with identify theft and fraud on the rise, you will be glad you do!