Qualify for Better Mortgage Loans by Improving Your Credit Score
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by: marciafreeman
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A poor credit rating is a problem when you need to qualify for mortgage loans. Your fees and interest rates will be higher, making your mortgage more costly, and your credit rating will act as a beacon for predatory lenders. Before you give up, accept whatever youre offered, and wind up saddled with mortgage loans with restrictive riders and high interest rates, take a time out and raise your credit rating. Then reapply for a mortgage, and see how much better a deal you can get.
Here are some tips for making your credit score more attractive to mortgage lenders:
* Lower the amount of money you currently owe. The amount of your debt payments should be 40% or less of your monthly income. Payments that count as debt include current mortgage loans, student loans, credit cards, and car payments. When calculating your debt to income ratio, lenders will add in the amount of the loan they are considering offering you, so not only your current debt, but also your debt after taking out the mortgage, should be under 40% of your monthly income.
* Raise the percentage of credit you have available versus the percentage of credit you have used. Lenders like to see that you have plenty of credit available and you have used relatively little of it. Improving the ratio involves not only paying down your existing debts, but getting new credit if you can. Call credit card companies with whom you have a good relationship and ask whether they will extend your credit line. Also apply for new credit cards if your credit score is high enough to allow you to take out new cards. And dont close unused accounts! Common wisdom used to say that creditors should close unused accounts, but now this tactic worsens your credit score by lowering the amount of credit you can command.
* Review your credit reports, and if there is any inaccurate information or if there are black marks on your record that should not be there, dispute them immediately. Fixing mistakes and clearing up misunderstandings can increase your credit rating dramatically.
* Wait. Your credit rating is partly a function of time. The longer you spend paying all your bills on time and staying out of trouble, the better your credit rating will be and the more attractive you will look when you apply for mortgage loans.
Applying for mortgage loans with good credit is difficult enough. Poor credit can make the process agonizing. Before you go on the market for mortgage loans, clean up your credit report, improve your credit rating, and make getting a loan that much more successful and stress free for yourself.
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