Credit Do's & Don'ts During the Home Buying Process
When in the process of buying a home, your credit score is one of the most important things to defend and protect. Any changes in your score can affect how much you can afford, what mortgage rate you will qualify for and if you will qualify at all.
During the escrow process it is important to stick to these rules in order to get your transaction to close:
1. DO NOT charge any expensive items to your credit card. Large credit card balances will affect your loan to debt ratio which is used to calculate how large of a mortgage you can afford.
2. DO NOT apply for any new credit cards or loans. New credit lines and “hard inquiries” can lower your score.
3. Do NOT buy or lease any new major items such as a car, boat or major appliances (even if they are 0% interest).
4. Do NOT co-sign for anyone else’s loan.
OTHER TIPS INCLUDE:
· DO NOT change jobs --- If you must or have to, its best to get a job that is within the same field you have been in for the last several years.
· DO NOT start any remodeling projects in your current home.
· DO continue to make payments on any loans & credit cards that you owe.
A new credit report will be pulled prior to closing to make sure no new credit has been established during the transaction and any inquiries will have to be verified.
Ways to Improve Your Credit Score
If you run into credit score problems, here are some ways to improve it. However, keep in mind that an improved score doesn’t happen overnight. Changes could take 1-6 months to show as an increase of your credit score. If you are planning to buy a home or in the middle of an escrow, a change in credit could immediately affect your plans and may have to delay them for months. So be careful!
1. Check your credit score with a free inquiry such as Credit Karma. If it has an incorrect information or there is a problem, contact the related credit agency and dispute it with the lender (i.e. If its a late payment on your Macy’s card, call them directly). Checking your own credit does not negatively affect your score.
2. Pay your bills on time. If you miss or forget a payment, the longer the following payments have been paid on time, the better will help you get your score back on track. Use payment reminders or set up auto payments.
Be aware that paying off a collection account will not remove it from your credit report: it will stay on your report for seven years
3. Keep a low debt amount. Pay off your cards or keep the balance low. Moving around your debt will not help.
4. Don’t close unused credit cards as a short term strategy to improve your score.
5. Use a credit fixing company but do your research first to find a reputable one.
Remember, a good credit score is key so keep on top of your credit. Hope these tips help!