Several factors come into play when getting a mortgage, and your credit report and FICO score is one of them. If homebuyers are having trouble obtaining a mortgage, it typically helps to improve your credit report and raise your FICO score.
Your credit score is based on many factors, including your payment history, amounts owed, and more. And while there is no quick fix, here are tips to improve your credit report to help you get approved for a mortgage.
Pay Off Your Credit Cards and Lines of Credit
One of the easiest ways to improve your credit score and prove that you can afford a mortgage is to eliminate other forms of debt from your monthly budget. If you have an outstanding credit card, student loan, or other debt, aim to pay these debts off as quickly as possible.
The best way to manage your credit is to be aware of your credit limits and ensure that the balances on your revolving accounts are low in relation to the allowed limit. This is referred to as “credit utilization” and is calculated by adding up the balances of all revolving credit accounts and dividing it by the credit limit of all revolving accounts. Lower credit utilization is positive for your credit score, while higher credit utilization is bad.
You’ll also want to avoid taking on any new loans while you’re trying to get your mortgage approved since these are likely to show up on your credit report and can hurt your chances at approval.
Related: What is your debt-to-income ratio, and why is it important in qualifying for a mortgage?
Get a Credit Card
A credit card can be one of the fastest ways to improve your credit. You can build a positive payment history by signing up for a credit card and paying on time every month.
Keeping spending on the card low creates a low credit utilization ratio, positively impacting your credit score.
Of course, irresponsible use of a credit card can negatively impact your credit score.
Pull Your Credit Report and Correct Errors
Checking your credit history by pulling a copy of your credit report is a simple way to potentially improve your credit score.
You may discover that there are errors or inaccuracies, such as a past loan that was fully paid or a missed car payment that was reported in error, that may be working against your credit score.
Every credit report error that is caught and corrected improves your credit score, helping you obtain a mortgage.
Pay All Bills on Time
Paying all of your bills on time and every time can help improve your credit score. Your payment history is one of the most important factors in determining credit scores; having a history of on-time payments helps achieve excellent credit scores.
Setting up automatic payments or payment reminders can help keep you from missing a payment.
Related: Missing 1 Mortgage Payment Affects Your Credit Score. Here’s What You Can Do.
Marimark Mortgage
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.
The Marimark Mortgage Newsletter will keep you informed with important events in the mortgage industry that could impact your finances.
We especially focus on ways to save money on your current and future mortgages. And, we continually share the information we share with our clients, because we believe informed consumers are the best consumers.
Real estate agents, and other professionals in the industry, will receive an ongoing wealth of information that will help them serve their clients.
