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3 Ways to Prepare Your Credit Before House Hunting

by Kim Noble 05/17/2020

Photo by bongkarn thanyakij from Pexels

Shopping for a new home should be an exciting experience, but if you are unsure of where you stand with your credit, it can be a little nerve-wracking. Having good credit will not only help you to secure more favorable interest rates for your mortgage, but it can also help you to avoid less favorable loan structures, higher down payments, and additional costs such as PMI. The best way to prepare yourself for your financing is to whip your credit into shape before your hunt begins. Check out three ways to help prep your credit.

Check for Any Collections

Collections are delinquent accounts that can seriously affect your credit score. Review your credit report and address any collections that are listed. If there are ones on there in error, file a dispute with the credit bureaus. If you owe the debt and can pay it, contact the collection company and ask if you can satisfy the debt by paying it and have it removed from the report. Finally, if you can not afford to pay the whole debt, discuss with the creditor possible settlement options.

Don't Request Any New Credit

When you open a new credit card or credit account, it can affect your credit in multiple ways. First, it will count as a hard inquiry, which can slightly lower your score, and secondly, it may change the average of your credit history. Mortgage companies don't like to see a lot of credit being acquired right before a mortgage is being established, so if it can wait, let it wait until the mortgage is secured. 

Pay Down Your Credit Card Balances

If you have the means to reduce the balance of your credit cards, now is the ideal time. Your credit score is affected by your credit card balances in two primary ways. The first being the amount of debt that is listed on all of your credit cards. The second is the ratio of the amount owed on your card in relation to the credit limit on the card. A good ratio is less than 30%, so to keep your credit score high, you will want to be below this percentage. Paying a large chunk of your debt can increase your score by several points, and also improve your debt to income ratio. Just be sure to do this at least thirty days out so that the new balance is reflected when your score is pulled.

Don't let poor credit lower your chances of buying the home that you always wanted. Follow the tips above to pump up your credit before applying for your next mortgage. Even a few points can mean significant savings. 

About the Author
Author

Kim Noble

I know and love the Southwest Florida area and am proud to call it home! And I'm passionate about the real estate market here. Naples and its surrounding areas,such as Bonita Springs, Estero and Ft. Myers, is world-renowned for its pristine beaches, world-class shopping, countless dining venues, boating, premier golf courses, vibrant sunsets and overall active lifestyle. The temperate climate attracts those who desire tropical weather, with an average temperature of 75 degrees with 55 inches of rainfall. When shopping for a home in Southwest Florida, you'll quickly learn that there are literally hundreds of communities to choose from. Some neighborhoods are brand new while others are well established. So, how do you find the community that best fits you and your lifestyle? That's where I come in. I've been helping buyers find their perfect place in the sun since 2005. I also help homeowners who want to sell their current home and find another to fit their new needs. With 20 years experience in the real estate business, I strive to exceed your customer service expectations by demonstrating honesty, reliability and an intimate knowledge of the market. Consider me your ambassador to paradise and contact me today to find your perfect home in Florida or sell your current house!