When it comes to obtaining mortgage loans, credit score is one of the single largest individual factors. Your credit score plays a big role in the kinds of mortgage rates you can get approved for and several other big factors, and having a score that’s too low can be a big obstacle in getting the best possible mortgage.
At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. Here are a few common credit mistakes that put people in a bad position for a mortgage, and how you can keep yourself from falling into these traps.
The most common mistake here is falling behind on payments, which can often happen for reasons that aren’t entirely in our own control. But to whatever degree possible, you want to avoid this – late or missed payments are one of the easiest ways to lower your credit score, and it can take longer than you’d think to rebuild once this happens.
There are certain cases where it might be prudent to consolidate all your debt to a single card or account, but in advance of searching for a mortgage is not one of them. Moving all your balances to one card makes that card appear to have a very high debt-to-credit ratio, which is a big factor in your overall credit score. Instead, look to keep the debt percentage on each separate card as low as you can.
The more of your available credit that’s in use, the lower your score will go. If possible, look to stay below 30 percent of your available credit in use at any given time, and never approach maxing out your cards.
Closing out accounts you aren’t using might seem smart, but it actually decreases your total available credit – in turn, this raises you debt percentage, as you’ll then be using a higher percentage of your available credit. Even if accounts are sitting with no outstanding debt, still keep each card.
Opening Too Quickly
On the flip side, applying for or opening too many accounts in a short period is a red flag and might lower your score. Only apply for credit you truly need, and try to put gaps between your applications.
For more on credit mistakes to avoid, or to learn about any of our mortgage services, speak to the pros at Altius Mortgage today.