Building a credit score for the mortgage you want

Building a credit score for the mortgage of your dreams

Being involved in sports, or simply in the workforce, we often find ourselves comparing ourselves to others. Competing is a way for us to reach goals that we’ve set for ourselves. So, we compete against other people in an effort to determine a winner. But, with competing we compare and bring ourselves down. We think, “that person is much better at (blank) than me.” Or, “I just can’t do (blank)!”. What we often forget is that getting from point A to point B is a process. It takes practice and time to get better at what we are doing to reach our goals.

When we are applying for a mortgage to buy a home, one of the big components is our credit score. Our credit score helps determine whether or not we qualify for a loan and will also have an impact on the terms of the mortgage. For some, we look at our credit score and wish it were higher. We think, “I wish my credit score was this instead of that.” Or, “How do I improve my credit score?” A better credit score can mean better terms for our mortgage. Improving our credit score is a great way to improve our odds of getting the mortgage we want. Here we talking about building a credit score for the mortgage of your dreams!

Review your credit report

One of the first steps to improving your credit score is to review your credit report. By reviewing your credit report, you can look for inconsistencies. Discrepancies in your credit report can have a negative effect on your credit score. Inaccurate information that’s in your credit report and a lower credit score could then relate to less desirable qualifying terms for a mortgage. Even worse, inaccurate information could mean your mortgage application gets denied altogether. If there are discrepancies in your credit report, you should dispute the misinformation with the credit bureau. By providing the credit bureau with proof of the mistake and accurate information, it can be removed from your report and positively impact your score.

Both TransUnion and Equifax allow you to order a free credit report. There are limits on how often you can get this report but we put together a post on the best ways to check and monitor your credit score here!

Pay your bills on time

A major offender in impacting your credit score is how punctual you are with paying your bills. When bills are ignored or paid late, your credit score suffers. By creating a routine of paying your bills on time, you can greatly improve your credit score. Once you’ve paid off your overdue bills, or are in the process of doing so, work to build your consistency. This will make those overdue bills from the past seem less harmful and improve your credit score. The longer you maintain the routine, the better your credit score will get. Additionally, this will help you receive more desirable and competitive terms for your mortgage.

Work on your debt-to-income ratio

When we create a routine with paying off our bills promptly, we generally maintain a lower level of debt. When we apply for a mortgage, the lender will evaluate our debt-to-income ratio. Our debt-to-income ratio is a comparison of the amount of debt we have to our income. So, a high level of debt and a low level of income will mean a higher ratio. The debt-to-income ratio doesn’t have an effect on your credit score. However, when the debt-to-income ratio is paired with your credit score, it can tell a lot about your credit health.

Typically, higher levels of debt are harder to manage. Taking on a mortgage while already struggling to manage your debt load can make lenders wary. Lenders look for stable finances. This means maintaining a good credit score and a manageable level of debt. As you pay your bills off, on time, your credit score will improve and so will your debt-to-income ratio. Moreover, it’s important to not take on any new debt without talking to an unbiased mortgage professional first. Lenders will question your financial stability if you are taking on new debt. This can range from buying a new car, to simply applying for credit cards. The ideal borrower is one with a low debt-to-income ratio and a high credit score!

There’s no better time to start than now

When we compete in an event or for a job position, we come away with things that we’ve learned. This allows us to grow from our mistakes and make the changes we need in order to get better. We then practice and create processes that help us reach the outcome we desire. When improving our credit score for a mortgage, we start by reviewing our credit report. This allows us to look for mistakes and find areas that we can improve upon. We then create a process or routine of paying off our bills on time. We, in turn, lower our debt-to-income ratio and raise our credit score. 

You can go into your mortgage appointment and submit your application with confidence. You’ve become more financially stable throughout the process, and are rewarded with the mortgage you want. When building a credit score for the mortgage of your dreams, give us a call at Clinton Wilkins Mortgage Team. We will help you create a process that gives you the best chances of getting a competitive mortgage. You can give us a call at 902-482-2770 or get in touch with us here!