Check Your Credit Before Applying for a Mortgage

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Your credit report is one of many documents that companies use to assess your creditworthiness. Creditors will pull your credit before approving your application for a credit card, and credit checks can also take place when signing up for utility services or getting insurance. Your credit also plays a big role in qualifying for a mortgage loan.

It probably goes without saying, the better your credit file, the easier it is to get credit. So if your plans for 2019 include buying a home, it’s important that you become familiar with your credit report and credit score. 

How to Get a Copy of Your Credit Report

When applying for a mortgage loan, we’ll check your credit report and score to make sure you meet the minimum requirements for financing. But you should also check your own report and score beforehand. 

Information on your credit report can change often, and sometimes mistakes and unfamiliar accounts can appear unbeknownst to you. Major errors lurking on your credit file can decrease your credit score and possibly make it difficult to get a mortgage loan. 

Even if you don’t have plans to apply for a mortgage or another type of credit, it’s recommended that every consumer checks their credit file each year. Getting copies of your credit reports is easier than you think. In fact, you’re entitled to one free credit report from each of the three credit reporting bureaus (Experian, TransUnion and Equifax) every 12 months. 

There are multiple ways to get copies of your credit reports. You can contact each bureau directly and submit a request online. Or, you can visit AnnualCreditReport.com (the only authorized website for free credit reports) and request a copy from each of the bureaus. 

Once you have your credit reports, carefully read through the documents to ensure accuracy. If you find a mistake, file a dispute with the bureaus. 

Along with checking your credit report, you can also get your credit score from websites like MyFico.com and Credit Karma. Depending on your credit card company, you might be able to see your credit score for free each month.  

Why Check Your Credit Before Applying for a Mortgage?

Checking your own credit before applying for a mortgage helps you gauge your approval odds. You can only get a home loan if you meet the minimum requirements for a particular mortgage program. Therefore, your credit score is need-to-know information. 

If a self-credit check reveals a low score, you then have an opportunity to make improvements to your score before submitting an application for a mortgage. In addition, you can dispute errors on your report that might prevent an approval. 

Credit score requirements vary by mortgage loan. For example, the minimum credit score for a conventional loan is 620, while the minimum credit score for an FHA home loan is 580.

If you need to repair or increase your credit score, start by paying your bills on time and paying off credit card debt. Your payment history and balances make up 35% and 30% of your credit score, respectively.

Keep in mind that checking your own credit report doesn’t hurt your credit score, unlike credit checks completed by a lender or creditor. With that being said, feel free to check your credit as often as you like to ensure you’re on the right path for a mortgage approval.

Why Does Your Credit Matter?

Your credit history doesn’t only help you get approved for a mortgage, it also determines your mortgage rate. Ideally, you want the lowest mortgage rate possible to enjoy a low mortgage payment. A low rate also reduces how much interest you pay over the life of the loan. 

Mortgage borrowers with the best credit scores — 700 or higher — typically qualify for the best mortgage rates.

Bottom Line

Let 2019 be the year that your homeownership dreams come true. Whether you’re thinking about purchasing your first home, buying another home, or refinancing your current loan, a home loan approval starts with a good credit file. 

Speak with the loan experts at Cherry Creek Mortgage today to learn about our numerous loan options and get answers to your important credit questions.

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