Having a high credit score can help you get into a better loan program with a better rate, so understanding credit scores will help you take the steps to improving your scores.
To get a mortgage, we do a three score merged report. This means we get your credit score from TransUnion, Equifax and Experian. We then use the middle credit score to determine what loan program and interest rate you qualify for. If there is more than one borrower, we use the lowest middle credit score.
Clients will often tell me what they think their credit score will be based on a third party such as freecreditreport.com or their Discover statement. The problem with this is that the scores I pull are usually different and I have seen it go both ways – up sometimes and down sometimes. It is always best to have your credit pulled by a mortgage professional. I can then give you specific tips on improving your score.
Here are a few general tips to getting your credit score up.
- Keep your revolving account balances below 50% of the high limit. Maxing out your credit cards will tank your credit score.
- If you pay off a credit card, do not close the account.
- Open a new revolving account and use it monthly, never letting the balance get above 50% of the high limit and always paying when the bill is due.
- Pay off any judgments and save all documentation in case it does not show paid off when your credit is pulled the next time.
- Do NOT pay off medical collection accounts if you are close to buying a home. Medical collections do not need to be paid off and paying them off may show up in your scores as new negative activity. I feel it is important to pay bills that you owe, but in this case, wait until after closing.
- Pay non-medical collection accounts as quickly as possible and again, save all documentation.
- Do not let anyone inquiry into your credit if possible. Especially be wary at car dealerships. They will often “shop around” for a lender and then multiple inquiries show up, lowering your scores.
Please let me know if there you have any questions regarding credit scores or would like us to pull your credit and give you specific advice on your situation.