Those who have their eyes on homeownership should focus on boosting their credit score years before they actually apply for a mortgage. When applying for a home mortgage, applicants with a high FICO score will likely be approved and in many cases, secure the lowest interest rates available. In order to boost one’s credit score, potential mortgage applicants should focus on paying their bills on time, reducing their overall debts, opening lines of credit, holding debt on a few of those lines of credit, and reporting any errors on their credit report to the three main credit reporting agencies.
#1 Paying Bills On Time
Before applying for a mortgage, applicants should have a long history of paying their bills on time. Since paying bills on time is one of the main components of a high FICO score, doing whatever is necessary to remain in good standing with lenders is crucial.
#2 Reduce Debt Load
Having some debt is a good idea, but mortgage applicants shouldn’t have overbearing debt loads before applying for a loan. Ideally, pay down high debts in order to improve an overall FICO score. When going through the approval process, mortgage lenders look at the ratio between income and debt when deciding whom they finance. Those who show that they have the potential to pay their mortgage every single month by paying down their overall debt load have a greater probability of securing a mortgage.
#3 Have Debt On 4 Of 7 Lines Of Credit
Those who want to secure a mortgage should have a number of lines of credit open in order to demonstrate their worthiness. In addition, about half of those lines of credit should have debt on them. While these debts shouldn’t be overly high, a small balance will contribute to a better FICO score overall. In order to benefit from this strategy, applicants must pay at least the minimum balance on these lines of credit every single month.
#4 Report Credit Reporting Errors
About six months before applying for a loan, potential applicants should pull their credit report, analyze it, and report any errors to the three main credit reporting agencies. Those who apply for a mortgage with an accurate credit report should have a good understanding of their approval potential.
#5 Avoid Errors Months Before Applying For A Mortgage
Months before applying for a home mortgage, applicants should avoid applying for any new lines of credit and avoid pulling any credit reports. Anytime a credit report is requested, it temporarily reduces the FICO score of this individual. In addition, avoid applying for any new lines of credit, as this can give lending institutions a reason to deny a mortgage. With that said, avoid financing a car or boat until after securing a home mortgage. Since those who are looking to apply for a mortgage need all the help they can get, avoiding these errors will likely to result in the highest potential FICO score.
Boost Your Credit Score And Secure A Mortgage
Those who are interested in securing a home mortgage should follow these 5 crucial steps in order to boost their credit score and end up capitalizing on the house of their dreams.
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