5 Essential Tips for Priming Your Credit for a Mortgage Applications

Poor credit score report with pen and calculator

Priming your credit before a mortgage application is easier than you might think. This article will outline 5 effective tips for to enhance your score.

While it’s not an accurate gauge for overall financial stability, a strong credit score can be useful for taking out car loans, securing investment financing, and being approved for a mortgage.

If you have applied for a mortgage, only to discover that a low credit score is resulting in loan rejection or high interest rates, there are steps you can take. While there are plenty of options for low-credit borrowers, the higher your score, the easier it will be to secure the perfect loan for your future.

Best of all, improving your score is easier than you think. By understanding how your credit score is calculated and what steps you can take to enhance it, you’ll be more likely to get the affordable loan you deserve.

Priming Your Credit: 5 Simple Tips to Improve Your Score

1. Pay All Current Bills on Time

One of the most important aspects of your credit score (for obvious reasons), is your payment history. When lenders review your credit report, they want to see that you have made payments in a timely, consistent, and reliable fashion. Past payment performance has been shown to be one of the most reliable indicators of the future, so it has a strong impact on your overall score.

To improve your score, the best thing you can do is pay all your bills on time. Credit card bills are obvious, and making on-time payments on car loans and student loans also has an impact on your score.

To make sure your payments are timely, automated bill payment is one of your best tools. As far as the credit companies are concerned, an automated payment is the same as a manual payment!

2. Pay Off As Much Debt As Possible

One of the most important steps you can take to improve your credit score is to pay off as much debt as possible. By paying off debt, you reduce the total amount that you owe, which obviously has benefits for anyone seeking to take out a mortgage. One of the most important factors in your mortgage application is the debt-to-income ratio, or “DTI,” which is essentially a comparison of how much goes out in monthly debt payments compared to how much comes in through your income. If you owe $2,500 every month, for example, and you earn $10,000, your debt-to-income ratio is 25%.

A major portion of your credit score (the second-highest factor, in fact) is “amount owed.” The lower your total amount, the more you can be trusted to take on new debt, so while lenders (and credit bureaus) like to see some history of debt responsibility, they are also likely to reward you if you have lower debt payments.

If at all possible, you can prime your credit score by eliminating debts, starting with small debts like credit cards and other minor accounts.

3. Don’t Create New Debts and Credit Lines

Opening new credit cards can significantly lower your chances of approval.

Statistically speaking, new debt increases your chances of default on mortgage loans, and lenders prefer that you have maintained steady debt loads for an extended period; they don’t like to see a rapid series of new debts right before an application.

One of the worst things you can do for your credit score is take our a flurry of new debts and credit lines. Multiple credit cards and other forms of debt will only lower your score, so avoid taking out a bunch of debts right before your mortgage. To prime your credit, stick with what you have and maintain a steady, consistent payment schedule.

4. Get Credit for All Your Bill-Payment Activity

If you are paying a bill, you should get credit (literally and figuratively) for making these payments. In many cases, people are making regular payments to utility companies and cell-service providers, but this activity is not being logged in your credit profile. However, by contacting the credit bureaus, you may be able to have these payments reported on your credit profile.

For example, Experian, one of the major credit bureaus, offers a service called Experian Boost. This service allows consumers to get credit for phone and utility bill payments, which has the potential to enhance your score. This option may not be offered by all of the credit bureaus, but it does create an opportunity to enhance your score quickly.

You should also review your debt payments and compare these against your credit reports. If a bill, such as a car payment, is not being logged in one of your credit profiles, you may be able to contact them and have this information included.

5. Consider a Credit Rescore

Sometimes called a “rapid rescore,” this is the process of submitting new information to credit agencies in the hopes of improving your score. There is often false information on a credit profile, and your report may have inaccurate or outdated data. There could be false information, such as name confusion, or old information (that should have been deleted) may still exist on your profiles.

You don’t have to accept these mistakes as a simple part of the credit process. You can perform a rescore on your own or with the assistance of a qualified professional, and it can significantly improve your score and increase your chances of mortgage approval. A rescore is best performed right before you apply for a major loan like a mortgage or car loan, and it can help remove negative items that may be dragging down your credit.

With these simple tips, you can enhance your score and enjoy multiple benefits, including better loan terms and potentially lower interest rates.

Dedicated Service for Your Mortgage Needs

No matter what your current credit score, our team can help you secure the right loan for your specific needs. From large jumbo loans to low-credit FHA loan, we are here to help you purchase a home that will make you and your family happy for years!

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I hope you enjoyed reading this article. It's my goal to keep you updated with the latest real estate mortgage news. I'm proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for Cross Country Mortgage. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2019. Got a question for Chad? Call (858) 353-8331 or submit your question online