Credit Tips if You are Considering Buying a Home (or Refinancing)

Are you considering buying or refinancing your home in Washington? You may be surprised at what you should and shouldn’t do. Some things that are common sense may actually not be the best actions if you’re planning on obtaining a mortgage in the near future.

Essential Credit Tips for Homebuyers

Please check out my latest video with simple credit tips.

A few highlights from the video:

Think twice before paying off and closing old debts

Credit scoring actually favors older, established debts that have been paid on time. If you need to pay off debt to qualify, it’s often best to wait until closing — talk to your loan advisor first. It’s also possible the funds you’d use to pay off debt might be better spent on your down payment and closing costs. Closing accounts, or letting them go inactive, can actually lower your credit score.

Delay large purchases and new credit

Hold off on buying a new or used car, or opening a new credit card, while you’re in the mortgage process. New credit drops your score — even when it’s a smart move on paper, like trading a high-interest credit card for a lower-rate one. Opening new debt while closing old debt is a double whammy. Just make sure all your debts are paid on time, even if it’s only the minimum payment.

Check your credit report for errors — but talk to your loan officer first

I recommend getting a copy of your credit report and checking it for errors. If you find any, I don’t recommend disputing them right away — talk to your loan officer first, since disputing can sometimes work against you depending on your situation.

Watch your credit utilization

Make sure you’re not at or over your credit limit on any revolving account — that will significantly hurt your score. If you’re over 50% of your limit, your first goal is getting under 50%. For example, on a $5,000 limit card, aim to keep your balance at $2,500 or less. From there, work toward getting balances under 30% of the limit, which will help your score even more.
If you’re considering buying or refinancing your home, I’m happy to help — even if it’s a year or more away. I often build credit-improvement plans with clients well ahead of their purchase timeline, so everything’s in line when they’re ready.