If you need to borrow money to buy your new home, your credit score is key to getting the best rates and the maximum amount on your loan. Here's how you can avoid making some of the frequent mistakes that many home buyers make before obtaining a loan.
Whenever Possible:
- Keep the same job if you work on commission, have significant overtime, receive substantial bonuses, are self-employed, or work part time. Salaried employees are not usually hurt by switching jobs if they stay in the same career, and can be helped by switching to a higher-paying job.
- Do not apply for new credit cards. Even department store cards and gas cards will affect your credit score. Accounts open less than 6 months will hurt your credit score. Accounts open 6 months to 2 years will not affect your credit score much. Accounts open more than 2 years will tend to help your credit score when handled responsibly.
- Keep your credit card limits as low as possible. Did you know that a high credit card limit on your credit card will lower your credit score even when that credit card has a low balance? A good rule of thumb is to keep your credit card limit at or below two times your average monthly maximum balance due.
- Do not buy anything on a "No payments for # days" plan. This hurts your credit score more than actually reducing your savings and paying in advance.
- Keep your money relatively stable. Don't move it from bank to bank, or account to account.
- Don't make any unnecessary large purchases: New car, new furniture, etc.
- Finally, stay familiar with your credit history. Many times wrong information can be added to your credit score that takes time to correct. You want to make sure your score is accurate before you begin shopping for a loan. By law, you are entitled to a free credit report. Order a free redit report once per year from each of the three major credit bureaus and make sure they're accurate (www.AnnualCreditReport.com or call 877-332-8228).
- www.consumersunion.org/issues/creditmatters.html is a good place to find further information.