Avoid These Credit Score Traps When Planning a Home Purchase

It’s difficult to stay out of the home buying business these days with the mortgage rates so low. If you are feeling the itch to get your first home or even if you want to upgrade to a new home from your existing home, now is probably the best time to do it. In order to get that rate, though, you have to be sure your credit is up to par.

Some people will do things to improve their credit score so they can get decent mortgage rates. Unfortunately, some of the things they are doing to help their credit rating are actually sabotaging their score. Here are some of those traps that you should know about so you can avoid them at all costs.

Closing Old Accounts
You may think closing old credit accounts will help bring your credit score up. If you had trouble paying those accounts in the past and recently paid them off, your first instinct may be to close them so they no longer show the negative information from the past. Unfortunately, this hurts your credit score drastically. The negative information is still on your report regardless of closing the account or not. In addition, part of your credit score is based on the average length of your credit accounts. If you keep accounts open that you have had for several years, it will create a better average and improve your score.

Applying for More Credit
If you are planning on buying a home, keep your new credit accounts to a minimum. Opening several new accounts can wreak havoc on your credit score and bring it down to a level that will not get you a good mortgage rate. As tempting as it may be to apply for every pre-approval that comes in your mailbox, it is not conducive to getting a good rate because it drops your score too far. Stay away from doing this especially in the months leading up to your decision to actually apply for a home mortgage loan.

Waiting Too Long to Pay Your Bills
Just because you send your bills in before the due date does not mean they are going to apply to your account by the time they are actually due. Even making your payments online does not guarantee they will be applied in time. Sometimes it may take a few days before the payment applies which can result in late charges and penalties. This looks bad on your credit history and drops your score. Always make sure you allow plenty of time for your payment to apply to keep your score as high as you can.

In terms of your credit score and history, some things you do not know may hurt you. Be an informed consumer and home buyer so you can make the best decisions and get the best mortgage rates possible.