Need Help Improving Your Credit Score Before a Mortgage Application?

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Need Help Improving Your Credit Score Before a Mortgage Application?

Getting the best mortgage rate and options depends largely on your credit score. This article has some tips to help you improve your credit score and mortgage options.

The previous article provided great information about meeting with a mortgage lender, including the importance of your credit score, with tips on how to ensure your credit score is accurate. Your credit score is so important to the home buying process because it can often determine whether or not you will get a mortgage to buy your dream home.

Preparing Your Credit Score for a Mortgage Application

If you have received a copy of your credit score and you would like help improving it before meeting with a lender and applying for a mortgage, below are some tips fromSpeedy Title and Escrow Services, LLC which can help you do just that.

Start Using Credit

As strange as it sounds, if you don’t interact with credit at any level then it will be hard to build a credit score, as credit reporting agencies don’t have a lot of information to help them assess your ability to manage money and repay your debts each month. One way to provide this information is by obtaining a small-limit credit card. This method works by using this small card to pay only your bills. As soon as you pay these bills, immediately transfer money from your savings or salary account to pay your credit card before the statement issues. Using this method can help you to build a credit score without ever going into debt. The key is to ensure that you don’t forget that you need to make the transfer from your savings or salary account as soon as you pay the bill or use the card.

Close Old Accounts

The more liabilities you have, the lower your credit score will be. Even if you don't have any balances owing, the potential for you to grow your debt works against you. Look through your list of store and credit cards and see what you can close. As an example, if you have three store and credit cards and alternate between them, paying them all off each month, consider closing one or more to lower your liabilities. Once you are ready to apply, be sure to speak with an expert at Speedy Title and Escrow Services, LLC on (586) 739-2233 about the benefits of title insurance in TARGET. Available only prior to settlement, title insurance in TARGET provides financial security over the title of your home.

Bring It All Together

Paying a range of debts at their minimum monthly amount isn’t going to get you anywhere. Instead, it just keeps you in the one position - the position of owing money. Instead of paying off your store and credit cards, consider consolidating them all into a debt consolidation loan. A loan can be more effective than paying off cards for a range of reasons:

  • A loan has one monthly payment which actively reduces your debt as you pay.
  • A single loan with one lender is less financial liability than a range of loans from a range of providers.
  • Paying one monthly payment is easier to include in your budget, which means you are less likely to forget a payment which can impact your credit score.

Pay on Time with Direct Debits

Each time that you miss a payment, it is recorded against your credit file and affects your credit score. The more you miss, the more it affects your score. The best way to stop this is to ensure that all of your bills are paid on time. One way to do this is by switching your payments to direct debit. By using your budget and a separate account used only for direct debits, you can deposit all of the money needed each month into one account and let the direct debits take care of themselves. Not only can this ensure you don’t miss a payment, but it keeps your bill and everyday money separated, further helping you to stick with your budget.

No More Debt

The worst thing that you can do is take on more debt. Things like store cards which offer a promotion like points if you sign up can seem great, but the more financial liability you have, the lower your credit score. If you do want to take on a new credit or store card, be sure that it replaces one you already have. This can keep your liability to a minimum. Of course, be sure that you can pay your card off each month on time, to help boost your credit score.

Title Insurance in TARGET Is a Must

Once you have your credit score at a good level and you are ready to start buying your home, be sure to complete your due diligence. Items like title insurance should be considered a must-have, not a nice-to-have. By providing financial protection against the title of your new home, title insurance in TARGET gives you peace of mind over your homeownership. Before you sign any paperwork, speak with an expert at Speedy Title and Escrow Services, LLC by calling (586) 739-2233 to learn more about the process and how title insurance in TARGET can benefit you.