Looking to Buy a Home? 5 Tips to Improve Your Credit Score to Get a Better Mortgage

December 9, 2007 By Matthew Paulson

When most people go to purchase a home, they take whatever deal the mortgage lender will give them. Many get “house fever” and want to pursue the American dream so badly that they’ll sign whatever’s put in front of them so they can own their very own home. Many consumers have gotten themselves in real trouble in the last few years for taking exotic loans to pay for their home. They were sucked in with a low teaser rate, often when trying to get manufactured home refinancing, and then later found themselves unable to make their payment when their interest rate adjusted upward. When buying a home, don’t repeat these mistakes! Instead getting stuck with a sub-par loan, take active steps to improve your credit score so that you can qualify for the best mortgage, whether it be a mobile home mortgage or a traditional mortgage available. Here are five tips to help you improve your credit score to get into a better mortgage.

Check and Correct Errors on Your Credit Report – Most studies show that 1 out of every 3 Americans have mistakes on their credit reports that are significant enough to cause us to not qualify for the best interest rates available to us. Head on over to AnnualCreditReport.com and check your three credit reports for free to make sure everything on them is accurate and correct! If there are any errors, dispute them and get them corrected.

Reduce Your Consumer Debt – If you have credit cards or other consumer debt, pay down on them! This will lower your debt utilization ratio and improve your overall credit score.

Don’t Open New Accounts – Six months before you apply for a mortgage, don’t sign up for any new credit cards or other accounts. Credit inquiries and opening new accounts will lower your credit score by anywhere from 10 to 50 points.

Pay Your Bills On Time – It seems simple, yet many people don’t keep good track of their finances and make a payment late every once and a while. Even a few late payments will significantly lower your credit score and prevent you from qualifying for an optimal mortgage. Make sure to pay each payment early or on time each and every month!

Don’t Close Paid Off Accounts – A common misconception about credit scores is that if you pay off an account and close it, your credit score will go up. People think that if they have large credit lines with no balance that the bank will think they could potentially just go out and borrow a bunch of money and be in a much worse situation. It would make sense that having a bunch of credit available to you would damage your score, but quite the opposite is true. If you have a large amount of credit available to you, but don’t use it, you will have a much lower debt utilization ratio and have a higher score.

Don’t think that you’re stuck with whatever mobile home loans the bank will offer you now. Take active steps to improve your credit score so that you can get a better loan from the bank.