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Building A Credit Score

Building Your Credit Score for a Great Mortgage

Applying for a mortgage can be a nerve-wracking process. There are so many little bits and pieces. Some of them are critical parts of applying for a mortgage and will play a part in how much you qualify for. Your credit score is one of those critical tidbits when applying for a mortgage. Your credit score determines whether or not you qualify for a loan, and also will influence the terms of the mortgage. Polishing up your credit score is a nifty way to improve your chances of getting good terms on your loan.

Are you looking for some tips on building your credit score to get the best possible mortgage?

Be Punctual with Paying Bills

The biggest component that will impact your credit score is your punctuality on paying bills. Establishing a routine of paying bills on time will tremendously help improve your score. If you’ve recently been tardy on paying your bills or paid off some late bills, wait a little bit before applying for a mortgage. Improving your score and maintaining a routine of paying your bills on time will make those tardy bills seem less harmful. Moreover, a better credit history will allow you to receive more competitive terms on your mortgage. Creditors will also consider how long you’ve been paying your bills on time, so it’s great to build a consistent habit of doing so. 

We also recommend automating whatever payments you can, such as your cell phone and credit card bill, or student loan paybacks. This prevents you from accidentally missing a payment, and allows you to build credit automatically. It’s usually fairly easy to automate these payments and can go a long way in ensuring your score never drops from late payments. An easy example of this is going to your online banking website or mobile app and selecting to automate your monthly credit card bills. 

Look for Misinformation

Going over your credit report is the first step to building your credit score for a mortgage. Reviewing the report allows you to see if there are any inconsistencies and what could be hurting your score. Any inaccurate information that’s in your report could end up hurting your score. This could relate to you qualifying for terms that may not be as desirable or your application getting totally denied. Disputing misinformation to the credit bureau by providing proof of the mistake will guarantee that it is removed from the report. You can check your credit score free once a year from both TransUnion and Equifax.

Improving your Overall Credit Health

As you pay off your bills, it is important to keep your debt low. Lenders look at your debt-to-income ratio, which tells them how much debt you have in comparison to your income. While the debt-to-income ratio doesn’t directly affect your credit score, the two together can tell a lot about your credit health. A high debt-to-income ratio makes a lender a little bit more weary lending to you since it means you have a high level of debt compared to your income.

They will question your ability to take on any more debt, like a mortgage, since it will make it more difficult to manage high levels of debt. Moreover, it’s important to not take on any new debt throughout the process of applying for a mortgage. You want to show your finances are stable and that you can maintain your good credit score. As you continue to pay off your bills in a timely manner, your credit score will improve, and your debt-to-income ratio will inherently become lower. A higher credit score and lower debt-to-income ratio will make you the perfect candidate for competitive mortgage terms.

A borrower’s credit score is a vital part of applying for a mortgage. It is a way for lenders to check the health of your credit and whether or not you are a reliable candidate for a mortgage. Improving your credit score by paying off your bills in a timely manner and keeping your debt levels low will increase your chances of getting desirable mortgage terms. When looking for help building your credit score, come visit us at Clinton Wilkins Mortgage Team. You can reach us at 902-482-2770 or get in touch with us here!