Are you shopping for your next home, or even thinking about it? Even if you’ve owned a home before and have been through the mortgage application process, it’s easy to forget a few guidelines to keeping your credit score intact until final underwriting approval. Even small changes that buyers often think will help improve their credit or debt to income ratio could actually lower your score a few points, enough to change your interest rate or ability to get loan approval.
Here are 8 handy Do’s and Don’ts for those in the homebuying process:
- DON’T charge any new items on your credit cards, and especially don’t max out a card if you must put something on a credit card.
- DON’T apply for any new credit cards or loans, or consolidate credit cards at a lower rate.
- DON’T buy or lease any new major purchases – especially cars, furniture, appliances,
etc… (even trading in for a less expensive car or taking out a “no interest” loan may affect your credit score).
- DON’T co-sign for anyone else’s loan.
DON’T allow anyone to check your credit unless in the mortgage shopping process and even then, know the consequences (each inquiry may lower your credit score a few points).
- DON’T change jobs if you can help it – may result in loan denial.
- DO continue to make all regularly scheduled payments on time and save for your down payment.
- DON’T refinance your car or other purchase without first speaking to a mortgage lender. While it seems it would help your debt ratios, it may actually hurt your score more than it helps.
Another tip – often buyers think that if they pay off an existing credit card or car loan, this will improve their debt to income ratio. While it seems it would lower your debt, now you have just also lowered your available cash to close. Be sure to consult with a mortgage banker and get the OK before paying off any balances.
Lenders normally will pull a new credit report just before closing to make sure you have not opened any new credit lines. If you follow the Do’s (or should we say, mostly Don’ts), above you should ensure a less stressful loan process and a smoother home buying experience.
If you’d like to learn more about what factors affect your credit score, check out the FICO website.