Your Credit Score & Your Mortgage

Your Credit Score & Your Mortgage

It’s sad when we say that you’re just a number to lenders, but it’s true. In their eyes, your character is defined by your credit score. This also happens to be the determining factor whether you get approved or denied. Curious to know how you measure up in the eyes of lenders? Here’s a lowest to highest scale, so that you can see for yourself:

  • 580 and under: It’s likely your application will be denied or your rates will be extremely high.
  • 580 to 650: You may qualify but your rates and terms won’t be ideal.
  • 650 to 710: You’ll most likely be approval with slightly better rates and terms.
  • 710 to 750: Approval is definite and you’ll also get competitive rates.
  • 750 and over: Approval is pretty much guaranteed with VIP status, also guaranteeing you the best interest rates possible.

Basically, the higher your score the less of a risk you are considered to be.

Improving Your Credit Score in 3 to 12 months

If your credit score is not where you want it to be, there are a number of ways you can improve it and prove your creditworthiness in a year or less, depending on how bad it really is. In just a month or two, you will start to see the positive impacts of your proactiveness.

You can use these tactics to help you get there quickly:

  1. Make punctual payments. Did you know that your credit use and making on-time payments makes up for 65 percent of your credit score? Well, it does. If you have a habit of being late or making big purchases that you can’t afford to pay back quickly, it’s time to nip that in the bud now. Making your payments on time and using your credit card only for purchases that you can pay back in 30 days or less, will improve your score greatly. Most importantly, you don’t want to see a “30 days late” or “60 days late” on your credit file because it will remain there for a minimum of 3 years, damaging your score.


  1. Keep credit balances below 35 percent. Before you apply for a mortgage or car loan, you want to get your level of debt down. By keeping your credit balances under 35 percent you’ll avoid scrutiny from lenders. However, zero to 10 percent is more ideal. The lower the better, but 35 percent at the highest.


  1. Don’t cancel any unused lines of credit, it will only hurt you. If you have credit cards or line of credit accounts that you’re not really using, whatever you do don’t close them with the understanding that this will look better to lenders because this would be a false assumption. This will affect your debt-to-available-credit ratio, so keep your line of credit or cards active by using them at least twice a year for small purchases.


  1. Request increased credit limits. If your current limits are a bit on the low side, there’s always the option to request more. If you qualify then this can help to improve your credit ratio but ensure a new credit inquiry doesn’t have to be made. However, if you spend like you’ve got a hole in your pocket, this might not be the best idea.


  1. Pay off debts and collection accounts. If you’ve done any no-money-down financing, then you’ll want to pay these unattractive debts off as soon as possible. Ideally, you’d want to use a home equity loan since they have less impact on your credit score. When it comes to collection accounts, paying them off won’t help improve your score. However, if you pay the collection account in full or settle with the collection agency, then you can request a final letter of release that will state the agreement. You can also request they update your credit file accordingly, which will look better than a delinquent unpaid account.


  1. Correct inaccuracies by filing a dispute. Carefully review your credit report for any inaccuracies. More specifically look at the creditor’s name, the amount of the original debt, the outstanding balance, and date of last activity. If you notice anything that’s incorrect, dispute it right away. For instance, if the date of last activity is wrong this means that the collection account will remain on your file longer. What if the debt isn’t yours, then you can dispute it to be removed, which will increase your score.


Home ownership isn’t just a dream, it can be accomplished. Using the tips above can help you get there in no time at all. To get financial advice on home buying and credit cleanup, speak to a broker today.

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