5 common credit mistakes to avoid when getting a mortgage


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Do you think your credit score qualifies you for some of the best mortgage terms available today?

Maybe you’ve requested your credit scores recently and you think they look pretty good, but what if what you’re looking at is entirely different than what lenders will see?

Here are some common credit mistakes borrowers make when applying for a mortgage.

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1. You see the same credit score lenders do

The free credit score you get online or from your bank does not necessarily mean that is the credit score your mortgage lender will be looking at. 

Many free credit reporting services or consumer credit reporting services only give you one or two credit scores from one of the bureaus, not a tri-merge, which is what lenders look at.

Mortgage lenders require a full tri-merge credit report when reviewing your loan application for a loan approval. It’s a requirement that credit reports are also specific to the company that pulls them, put another way, you cannot transfer your credit report from one credit company to another.

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2. Dispute any credit errors right away

If you dispute any credit accounts you will likely be unable to get a mortgage until you take those accounts out of dispute. Once you’ve done that, then the lender will rerun automated underwriting to determine how much you qualify for.

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3. Pay off as much debt as you can, quickly

Paying off debt may, in some cases, make sense. It may also increase your credit score in the process, but it’s wise to only pay off at the advice of your lender. The advice of your lender carries far more weight and significance in determining how much you can qualify for than does your current debt and credit score.

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4. Don’t worry about your current mortgage payments

Pay all your bills on time, including your current mortgage and all your credit cards. Any accounts that have past-due balances almost certainly are guaranteed to have to be brought current or paid off in full.

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5. Avoid new credit accounts

When you buy a house for the first time your credit score will automatically go up 40 points in most cases, making you more credit-worthy. You heard that right: Buying a house will make you more credit-worthy, which is why you’ll start getting solicited with direct mail from various credit card companies saying you’re pre-approved.

The ideal credit situation that you want to put yourself in is to have three or four credit cards that you use and pay in full each month while having a mortgage in your name with ongoing monthly consumer debt. Manage it all well, and you’ll have an excellent credit score.

This article originally appeared on SonomaCountyMortgages.com and was syndicated by MediaFeed.org.

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