Mortgage lenders, wanting to be sure your credit report hasn’t adversely changed since they first approved your mortgage loan, may pull your credit report a second time ‒ and maybe only a day or two before you’re scheduled to settle on your new house. So, it’s critical that you protect your credit rating until settlement has occurred. Here are suggestions for avoiding common mistakes which home buyers sometimes make:
Don’t apply for new credit of any kind ‒ This includes new credit cards, new auto loans and new lines of credit. If you do apply, credit reports will be pulled by these companies. Mortgage lenders may think you’re about to take on more debt, making you a riskier proposition.
Don’t co-sign for anything ‒ By co-signing anything (like an apartment lease, auto loan or credit card application), you suddenly become a greater credit risk in the eyes of mortgage lenders.
Don’t increase your credit card balances or go over credit limits ‒ This may imply for mortgage lenders that you’re unable to stay within a budget.
Don’t close credit card accounts ‒ This may seem counter-intuitive; however, mortgage lenders look at your ratio of overall debt to overall available credit. The lower this ratio the better ‒ it’s a potential indicator of responsible spending. If you reduce your available credit, your ratio of debt to available credit will go up.
Don’t do anything that might raise a new red flag ‒ Until you’ve settled on your new home, don’t change your name, your address or even your job, if you can avoid it. Changes like these could jeopardize your mortgage loan.
Do stay current on all of your existing accounts ‒ Any late payments will potentially lower your credit score and could jeopardize obtaining a mortgage loan. If you know you’re going to be late on an existing account, it’s suggested that you let your mortgage broker or loan officer know ahead of time.
Do monitor your credit history ‒ There are many options for doing this. This will allow you to know immediately if anything unexpected or fraudulent appears on your credit report.
Do stay in communication with your mortgage broker or loan officer and your real estate agent ‒ If you receive any new information which might affect your ability to secure a mortgage or if you have any questions whatsoever, let your mortgage and real estate professionals know as soon as possible.
Let me know if you have suggestions for other advice to add (thank you). I hope all goes well for you when you’re securing your next mortgage loan!