There’s nothing more important than working on your credit score when you decide to apply for a mortgage. Improving your credit score will save you a ton of money. When we say a ton, we are talking about thousands of dollars over the term of the loan. Here are the most important three actions you can take that will have a positive impact on your credit score
Reduce your credit card balances
Credit utilization is one of the most important factors affecting your credit score. Your credit utilization should be or less than 25 percent of your credit limit and it’s even better if you can get it below 15 percent. This rule applies to both individual cards and your overall credit limit.
You may even want to use some of the cash funds you were planning to use for a down payment to pay off credit card balances.
Keep it safe & steady
While you want to improve your score if you are able to, at the very least you will want to keep it steady. Avoid opening new lines of credit if you are applying for a mortgage soon. This will cause a hard inquiry to show up on your credit report.
Make sure to deal with negative items
It is always a good habit to check your credit report for negative items a few times a year. You can get one free report from each of the three major bureaus (Experian, Equifax, and TransUnion) per year. You can also sign up on creditkarma.com for monitoring your credit score for free.
If you find any negative items such as collections, late payments and etc., write a letter of explanation to the original creditor. List the circumstances that led to the negative item, and request that it be removed from your report as soon as possible. Writing letters can be an effective way and removing a negative item will definitely improve your credit score drastically.
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