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Improve Your Credit Scores and Improve Your Home Mortgage
By Sheryl Landrum
CMR Columnist
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In case you aren't aware, the way to get a better interest rate on your home mortgage is to raise your credit score. What do you need to do to maximize your credit scores and lower your home loan interest rate?
- Keep your credit cards, but keep your balance versus your available credit low. Ideally, keep your balance at 25% of your credit limit; realistically, keeping it below 50% of your available credit is going to be beneficial.
- Pay your bills on time! Many borrowers with poor scores are those who don't take care of their monthly bills. While you may get a late payment charge, your credit report will not reflect late payments until your payment is over thirty days due. Suck it up and pay the bills and late fees before they impact your credit.
- Never let your mortgage payment go over thirty days late--it is the kiss of death for getting a home refinance or a new home loan--worse than a bankruptcy for many lenders.
- Don't let others run your credit! Mortgage lenders appreciate that you will probably talk to more than one lender when looking for a new home loan or a refinance of your current mortgage and credit scores should not be adversely affected with lender credit runs during a 30 day period. However, shopping for cars or audio/video equipment with numerous vendors can have a serious affect on your credit.
- Don't open new credit and don't close out too many credit accounts (especially older ones). Mortgage lenders usually need 3 to 5 active trade lines to judge a prospective borrower. A good history with a creditor will improve your scores while shopping for new creditors. Allowing just anyone to run your credit will probably lower your scores just when you need them to be at their best.
Give yourself the opportunity for a great home loan by being mindful of the above. It is the key to a good home mortgage with a great interest rate.
About the Author
Sheryl Landrum is a Senior Loan Officer with Charter Funding in Carlsbad, California.
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