The Basics: Your Credit Score and Mortgage Application

Like other lenders, pulling your credit report is one of the first things your mortgage banker will do when you are ready to buy a home. This is because your credit score plays a big role in determining your eligibility for a mortgage loan. Meaning, lenders use your credit report as one of the factors to determine if you are eligible to borrow money, and if so, how much. In this blog, we will share the basics of your credit score and how you can work to improve it.

What does your credit report contain?

You will find the following information in your credit report:

• Any missed or late payments, as well as unsatisfactory debts (i.e. charge offs, bankruptcies, etc.)
  
• How often you pay your credit card or loans on time and the amount you paid
  
• A business that has given you credit or loans
  
• The amount of each loan or credit limit for each credit card

There are three major credit bureaus that accumulate information from creditors to report your credit history: Equifax, Experian, and TransUnion. The information in these reports determines your credit score. It’s important to note that each bureau may have slightly different information. Different lenders and financial institutions may only be reporting your data to one or two of the bureaus instead of all three. As long as all the information is correct, you don’t need to worry!

You can pull a free copy of your credit report once a year from  AnnualCreditReport.com  or Experian. We encourage you to review your report, confirm everything is accurate, and resolve anything that negatively impacts your credit.

Below we have listed some ways you can improve your credit:

• Make sure you pay your bills on time
• Avoid excessive use of your credit card by establishing and maintaining a cushion to pay for unexpected expenses or repairs
• Don’t close old accounts and don’t open new accounts – this could decrease your credit score

Bottom Line 
Knowing and understanding your credit score is vital when applying for a mortgage. Before you apply, we recommend pulling a copy of your credit report and reviewing it thoroughly. Check your report to make sure everything is accurate and dispute any errors. If you need help understanding your credit score, or would like recommendations on how to improve it, we are here to help! When you’re ready to start your homebuying journey, we can help you find financing that helps you meet your financial goals. Click the button below to start the conversation!