We get a lot of calls with questions about credit. Credit is one of the biggest factors that can determine if you qualify for a mortgage, and what rate you can get – and the ins and outs can cause a lot of confusion. So we gathered some of the most common questions and simple steps you can take to help your credit score – and get the loan (and home!) you’ll love.
Simple Steps to Get Better Credit – and a Better Loan
- Avoid opening lots of credit cards at once. People often don’t realize that every time you give you social security number and someone pulls your credit – it’s a hard pull, and will lower your credit score. Even getting a department store credit card will show up on your credit report – and the more inquiries you have in a short period of time, the more it lowers your credit score. Fewer inquiries, and more spread out, leads to better credit.
- Don’t close a lot of credit cards at once. If you read the above point and panicked, don’t go and close all your credit cards. Lenders generally look for you to be using 30% or less of your credit limit – it shows responsibility. So having a lot of credit available to you doesn’t actually hurt you – but closing a bunch of your cards could move you from using under 30% to well over 30%. If you do still want to close some of your cards, try closing one every six months to a year.
- When you defer your student loan, it still counts against you. A lot of people don’t consider it, because it’s deferred – but a lender still has to look at it because it is a payment that you will be making in the future. So it’s important to keep in mind.
- Avoid making big purchases right before you buy a house. If you’re looking for a new car – wait until after you’ve bought your house. Making big purchases raises a lot of questions when lenders look at the flow of money in your account.
- Don’t be late. A standard in the mortgage world is that if you have been over 30 days late to make a mortgage payment, you have to wait a whole year to refinance or purchase.
- We get a lot of questions about options after bankruptcy. And there are options! See this post for some tips and clarification.
- Check your debt to income ratio. As a rule of thumb, try to keep your debt under 50% of your income.
Following a few of these simple principles in how you live your everyday life can help you have better credit, a better mortgage rate, and an easier transition when you’re ready to buy a house or refinance. If you have more questions or need help, we can help answer them and connect you with trustworthy resources for credit repair. No matter where your credit sits, we’ll do the best we can to help you and your family.
We wish you all the best!
The Christian Mortgage Mom