Helpful Mortgage And Real Estate Advice

Credit Clean-Up Tips to Help Obtain Mortgage Approval

By on March 3, 2014 in Home Buying Advice

Credit Score Guide
As result of a stark increase in mortgage interest rates and fees, it has become essential to have the highest credit score possible when applying for financing.

Any score below 740 (as set forth by Fannie Mae guidelines) carries far greater risk, and prospective borrowers will pay higher interest rates and fees. With a credit score above 740, borrowers qualify for the prime rate, which is 1 percent above the 10-year Treasury bill. Therefore, gaining control of credit is considered one of the biggest hurdles borrowers face when applying for any type of financing.

Enacting a few simple tips that help clean up a credit report go a long way in boosting a credit score to obtain the prime interest rate.

Gaining Control of Your Credit Score

Unfortunately, many potential borrowers believe there is little they can do to boost their credit score in the short-term. However, there are a number of options people can use to improve their score in both the short- and long-term. Here are some tips to help boost a credit score before applying for a mortgage:

– The three major reporting agencies, Transunion, Experian and Equifax, allow individuals to obtain one free copy of their credit report per year. There are three scores shown on the report known as Beacon, Empirica and FICO. The median of the three scores is used by mortgage lenders to determine an applicant’s credit score. Since most mortgage approvals are credit-score driven, it is critical for borrowers to know their actual score.

CLICK HERE to get a free copy of your credit report

– Compare installment loans versus revolving lines of credit contained within the report. Installment loans reflect mortgages, auto loans and personal loans with maturity dates. Revolving lines of credit reflect any type of credit card through a bank, retailer or home equity line of credit. On-time payments made on installment loans boost a credit score higher than payments made on lines of credit.

A Fresh Approach to Mortgage Qualification

Armed with a legitimate credit report and a strong score, borrowers can take away much of the negotiating power from mortgage lenders. Essentially, an applicant can choose their own loan program and inform lenders when they want a specific interest rate locked in.

Taking a few simple steps to regain control of a credit score relieves anxiety and stress associated with finances. It pays actual dividends in all aspects of a person’s financial well-being.

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About the Author

About the Author: Jessica Lucas is the managing editor for Mortgage Home Base, a top real estate finance blog dedicated to helping borrowers and home buyers understand the home loan process. Follow Jessica on Google +, and share your comments here. .
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