Credit scores, along with your overall income and debt, are a big factor
in determining if you’ll qualify for a loan and what loan terms you’ll
be able to qualify for.
Check for and correct errors in your credit report. Mistakes happen,
and you could be paying for someone else’s poor financial management.
Pay down credit card bills. If possible, pay off the entire balance every
month. However, transferring credit card debt from one card to another
could lower your score.
Don’t charge your credit cards to the maximum limit.
Wait 12 months after credit difficulties to apply for a mortgage. You’re
penalized less for problems after a year.
Don’t purchase big-ticket items for your new home on credit cards
until after the loan is approved. The amounts will add to your debt.
Don’t open new credit card accounts before applying for a mortgage.
Having too much available credit can lower your score.
Shop for mortgage rates all at once. Too many credit applications can
lower your score, but multiple inquiries from the same type of lender
are counted as one inquiry if submitted over a short period of time.
Avoid finance companies. Even if you pay the loan on time, the interest
is high and it will probably be considered a sign of poor credit management.
This information is copyrighted by the Fannie Mae Foundation and is
used with permission of the Fannie Mae Foundation. To obtain a complete
copy of the publication, “Knowing and Understanding Your Credit,” visit http://www.homebuyingguide.org.