When it comes to mortgage loan applications, lending institutions don’t like ANY surprises … And when it comes to applying for and obtaining a home mortgage, you don’t want any bombshells either!

Yet many people forget to review their credit report before they go house hunting – or they do it at the last minute – and they don’t know how to handle a less-than-stellar credit score or credit report.

If there are ANY problems on your report, you’ll want to know about them beforehand and be prepared to either explain them OR work to repair them. Here are 5 “need-to-know” nuggets on how to manage your credit BEFORE you find your dream home.

1. BE TRUTHFUL
Honesty is very important … It is not uncommon for people to instinctively try to hide or shy away from bad news. However, DON’T do this with your lender. Technology makes it virtually impossible to suppress any unfortunate news from lending institutions. Be proactive and explain any questionable financial issues that you may be aware of BEFORE they surface during the underwriting process.

2. TAKE YOUR CREDIT SERIOUSLY
Be sure to continue making timely payments to ALL your creditors. Keep your credit card use at a maximum of 30% of your limit. DON’T open any new lines of credit during the loan process, PERIOD! Lenders will pull your credit right before settlement to ensure that there is no additional debt on top of the soon-to-close loan.

3. DISPUTE ERRORS
Get a free copy of your credit report and review it. Make sure any negative items are accurate, and if not, dispute them. You can inquire by mail, but you can also inquire online. www.CreditKarma.com is free and gives updates, both good and bad, about your credit history.

4. BE PREPARED TO WAIT
If negative items do exist, they will affect your score less as time passes. The more recent the problem, the more your score will be negatively affected. For it to rise again, it is important to not accrue any new negatives, like continual late payments.

If your score is riddled with negatives from several years ago, be prepared to explain what happened and how you corrected it. If you have too many issues from the not-so-distant past, you might be better off waiting. Most lenders will offer guidance on how work on repairing negative credit as they want your business in the future.

5. HANDLE A MIX OF CREDIT RESPONSIBLY
As a prospective borrower, lenders also want to see one’s ability on how a mix of credit is handled, like installment loans and revolving credit. These lines of credit should be at least a year old and the longer, the better. Plan this well in advance as you DON’T want to open ANY new lines of credit right before buying a house as noted in Paragraph 2. However, if credit repair is necessary, by adding a different type of credit at the right time and handling it properly, it can actually boost your score.

We hope you found this post to be helpful, informative and interesting … Watch for our next BLOG POST on December 1st.

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