One of quickest ways to get ‘Unapproved’ for the loan on your dream home is to do something that negatively effects your credit score during the home loan process. One of the first conversations we have with all clients (good or not so good credit) is notifying them to NOT make any major purchases while building or buying a home. That means NO new car, furniture, electronics, etc…until the loan closes.

To better understand why or how this will effect you, I will give you an example of a client with good credit that buys a new car during the home loan process and the real cost of buying that new car. Oh, and the “Cost” I am referring to is not just the new payment.
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Good credit is not just important for getting approved for your new home but also ensuring a lower interest rate which can mean thousands in savings and a lower monthly mortgage payments. Establishing good credit and maintaining good credit habits will make getting pre-approved for your new home easier. Here are eight steps to good credit:

Step 1: Pay Your Bills on Time
Make it your personal goal to pay your credit and other obligations on time and for the required amount each month.

Debt obligations will include: Credit card charges, Loan payments, Rent or mortgage payments, Utility bills, Service or product bills, Taxes, Support payments, and more.

Take advantage of automatic payments and other online bill payment strategies offered by lenders and credit card issuers. This will ensure timely payments.
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1. Check your credit report at all three agencies- Equifax, Experian and Trans Union (checking your own credit is called a “soft-pull” and will not negatively affect your credit). Look for errors that may appear on your report. Each agency offers a place on their website to submit online disputes. They have 30 days to verify the information is correct or they will remove it.

2. Do NOT open new credit cards that you don’t need just to increase your available credit. This approach often backfires and will lower your score.

3. Keep your current account balances as low as possible. High outstanding debt will negatively affect your score since you will have a greater chance at missing a payment.

4. If you have old credit accounts that are paid off, don’t close them, simply cut up the cards. This will show a longer history of good credit and will help your score.
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