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What Credit Mistakes Do You Need To Avoid Before Applying For A Mortgage?

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When you're applying for a mortgage, you need a good credit score both to qualify and to get the best rate. Even a small change in your credit score can cost you thousands of dollars over the life of your loan. Here are some mistakes you have to avoid making before you can apply for your mortgage.

Not Checking Your Credit Report

You might think you have perfect credit, but you don't really know until you look. You might have been the victim of identity theft. There might be errors like a collection for something that you paid or someone else's debt got put on your credit report by mistake.

If you check your credit report ahead of time, you have time to fix any errors. Keep in mind that the credit bureaus have to give you an accurate credit report by law, but it takes time to go through the process of getting your credit report corrected. If you find out there are mistakes on your credit report when you're trying to close on a house, you might miss that opportunity to buy it.

Not Optimizing Your Credit Score

There are a number of steps you can take to quickly add points to your credit score. The easiest way is to pay down any credit card or loan balances. Debt can reduce your credit score.

There are also temporary tricks you can use. Your credit utilization is important, and it's based on the balance on your credit card statement. Even if you pay the card off every month, having a high balance can significantly lower your credit score. Paying that card off before the statement comes out can report a zero balance and improve your score.

Applying for Other Credit

Don't apply for any other credit when you're trying to get a mortgage. Any new credit applications lowers your credit score, even if you're not approved. New accounts also lower your credit score because you have a shorter history to show that you will pay your accounts. Don't buy a car, open new credit cards, or do anything else until you get your mortgage.

Closing Accounts

You also don't want to close credit accounts before you apply for a mortgage, even if you don't use them. Closing an old account can reduce your available credit and shorten your credit history. Both of those things can lower your credit score and impact what kind of mortgage you can get.

To learn more about how to qualify for a mortgage, contact a local mortgage broker today.