Your credit score is a key factor in the mortgage application process. A high credit score is crucial to obtaining a mortgage approval. It can also make the difference of living in an expensive apartment or getting approved for a mortgage. Credit scores can be elusive. Even if you do know what your score is, you may still be uncertain about the outcome. There are steps that you can take in order to improve your score.
Request a Free Credit Report
Getting a free credit report is an important step in the home loan process. This report will show you your credit score and any past mistakes. It is a good idea to request a report free of charge at least six month before you make a major purchase. It can take time to improve your credit score.
You can ask for your report at the federal commerce commission, or request it via mail. The process will take around 15 days. To request it, please use the Annual Credit Report Demand Form. A free credit report can be obtained from any of the major credit bureaus.
Calculating your mortgage credit score
Mortgage credit scores place a great deal of importance on two factors: payment history and credit utilization. While late payments can damage your credit, making all your payments on time will improve your score. Credit utilization measures your total debt to credit. Your credit utilization rate, for example, is 50 percent if you have a $1,000 credit card but only $500. An ideal credit utilization ratio is 30 percent or less.
Although credit scores are determined by lenders using slightly different methods, the basic factors remain the same. The credit score you receive from a mortgage lender will be significantly lower than your free credit score. Checking your credit report on a regular basis is an important step in improving your credit score.
A credit monitoring service
If you're in the market for a mortgage, getting a credit monitoring service can help you keep track of your credit score and increase your chances of approval. Although these services can't stop identity theft or criminal activity they can alert to potential fraudulent activity. This peace of mind is invaluable when you're about to make a big purchase.
A credit monitoring company is a service that scans your credit report and alerts to changes. The Federal Trade Commission estimates that identity theft and fraud are on the rise in America. A credit monitoring program can help you find unauthorized credit modifications in your credit reports. There are two types of credit monitoring services: paid or free. You can choose which one best suits your needs.
Get a lower credit score for your mortgage
Before applying for a loan you need to be familiar with your mortgage credit score. If your credit score is low, this is a sign that you have other financial problems, and adding another mortgage to your pile of debt is not a good idea. In addition, mortgages with low credit scores are expensive, and lenders will charge higher interest rates to compensate for the increased risk. You should wait for your credit score to improve before applying.
You can improve your credit score by reducing your debt. Paying off credit card balances will lower your debt utilization, and help build equity in your property. This will boost your credit score prior to applying for a mortgage.