Buying a home is a big step and a home mortgage is a long-term commitment, unlike any other item you’ll likely experience. To prepare for applying for a mortgage, you may want to take these steps to ensure that your credit is in good shape.

The first thing to do is check your credit reports. Once a year this can be done for free by pulling your records from all three credit reporting bureaus. You’ll want to review them to be sure that all of the information is correct. For a small fee, you can also get your overall credit score.

If you find errors on your credit report, work on getting them corrected before applying for a mortgage. It will make the process easier, could raise your score and place you position to secure a better interest rate. Higher credit scores which make you eligible for lower interest rates can easily translate into saving thousands of dollars in interest over the life of the loan.

Common credit reporting errors include payments showing as late that really weren’t and bills showing outstanding balances that have been paid off. Follow the credit bureau’s instructions to correct errors you may find.

Late payments can decrease your credit score, but consistently making all future payments on time will help to mitigate the situation. Experts also suggest that you can bump your score up by a few points by paying down or paying off your credit card balances. Of course, you’ll need to keep your balances down, so don’t charge new purchases to those credit cards unless you are able to pay the full balance at the end of the month.

Applying for new credit will also temporarily lower your credit score, so buying any big ticket items like a car or furniture, in the months before applying for a mortgage loan is discouraged. Ideally, you may not want to secure any additional new debt within a year of buying a home.

Finally, don’t close old accounts thinking it will raise your score. In general, you want to show a long, reliable credit history, so make sure you keep your oldest credit card open. Use your credit wisely, but don’t abuse it.

Making sure your credit score is optimized should save you money in the long run on mortgage costs, as well as let you know how much house you can afford. This will allow you to shop for a home with confidence.

If you have any questions about checking your credit score or getting a mortgage pre-approval, contact me to set up an appointment for a consultation. I’d be happy to offer you suggestions on how to improve your score and help you find the home of your dreams.

Allyson Hoffman, ABR, ACRE, CDPE, CRS, e-PRO, GRI, SFR, SRES
RE/MAX Villager
Serving Chicago's North Shore, North and Northwest Suburbs
[email protected]

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Allyson Hoffman is your ultimate real estate resource for Chicago's North Shore, North and Northwest Suburbs and surrounding areas. Visit my website for detailed information regarding today’s real estate markets.

Photo courtesy Marius Mauresan, Stock.XCHNG.