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October 29th, 2010

Don’t let your credit score scare away mortgage lenders

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The sheer responsibility that comes with owning a home — making all your payments on time, maintaining the upkeep of the property, etc. — can be a frightening task for those who aren’t prepared. However, before the monthly payments and the lawnmowers, comes the mortgage qualification process.

If you’re in the market to buy a home, achieving the American dream isn’t going to be easy thanks to all the stringent borrowing requirements placed on homebuyers these days.

To give you the best shot at qualifying for a mortgage, Alexandra Kay, professional writer and contributor to HSH.com, offers five ways to make sure your credit score doesn’t scare away any mortgage lenders:

1. Check your status

“You’ll want to review your credit reports six months or more before a large credit event like applying for a mortgage,” says Gumbinger. It can take quite some time to clear up any errors or solve legitimate disputes, and you want those things off your report when you fill out mortgage applications.

Even if you’re not in the market for a mortgage, you’ll still want to review your credit reports at least once each year. You’re entitled to one free credit report from each of the three major credit bureaus (Equifax, Experian and TransUnion) each year. Stagger receiving the reports, and you’ll have a credit update once every four months. You can access your free reports at www.annualcreditreport.com.

2. Pay on time

“Be extra careful to make each [of] your minimum payments on time each month,” says Barry Paperno, product support manager for FICO, inventor of the FICO score. “If you’re late making payments now, bring them current immediately and keep them current.” Your payment history makes up the largest part of your credit score (35 percent), and it takes longer to raise your score after late payments than it does for some other issues.

3. Pay down debt

Since the FICO formula looks at your credit card limits and balances, both individually and in total, shifting balances around won’t make your bottom line look any better. Instead, you’ll want to pay down balances while continuing to use the cards, says Paperno. Ideally, you’ll want to aim for a utilization percentage, both individually and in total, of under 10 percent. That means you’re using less than 10 percent of available credit on any one of your cards.

Be sure to continue reading Alexandra’s article “5 ways to boost your credit score before applying for a mortgage.”

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5 Responses to “Don’t let your credit score scare away mortgage lenders”

  1. Tweets that mention Don’t let your credit score scare away mortgage lenders | HSH Financial News Blog -- Topsy.com Says: October 29th, 2010 at 2:04 pm

    [...] This post was mentioned on Twitter by HSH Associates, HSH Associates. HSH Associates said: Don’t let ur credit score scare away mortgage lenders http://bit.ly/cZUz9X Here r 5 ways to boost ur credit score be4 applying 4 a mortgage [...]

  2. kentuckyloan (Joel Lobb) Says: October 30th, 2010 at 1:12 am
  3. Mitch Says: October 31st, 2010 at 3:54 pm

    Nice and short, Tim, but you know how I feel about credit scores in general. lol

    Having said that, I do agree that it’s important to make sure one’s debt is at least manageable in the eyes of lenders.

  4. Tim Manni Says: November 1st, 2010 at 1:11 pm

    Hey Mitch,

    Thanks for the comment

  5. amber bey Says: April 1st, 2011 at 9:08 pm

    I have a very low credit score do you give first time mortgage loans to people in this situation? Please email me.thank you,
    amber bey

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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