Your credit report is just one of the areas lenders will look at when you are buying a home, but it is a very important piece of the puzzle. If you have had credit issues in the past or just not had credit, you want to take time to correct any issues before you start the mortgage process.
Frequently I will meet with clients and go over their credit reports. Depending on what is on the report, I can help them to improve their score or may be able to find a company that will work with them to repair their credit report. The higher your credit score, the lower your interest rate will be and the easier it will be to get your mortgage approved.
A few tips to keep your score as high as possible are:
-Keep at least 3 active trade lines. Lenders like to see at least 3 tradelines that show you are using credit wisely. Ideally you would have at least one revolving line (credit cards) and an installment account (car or student loans). If you do not have at least 3 accounts you may want to open one more. If you are having problems getting credit, you may want to see about a secure card, but make sure they report to the credit bureau. Another possibility would be to see if someone will co-sign with you to help you get started.
-Make sure you make all the payments on time. Pay your bills when they are due, that is one of the best ways to keep your credit score higher. Late payments will lower your score quickly and take time to recover from.
-Keep your credit card balances low. Ideally you want to keep your credit card balance at a third of the available credit on that card.
By doing these things, you will keep your score as high as possible to help you in qualifying for a mortgage. Credit history will reflect on your ability and your willingness to pay your bills and that helps in qualifying for a new mortgage.