Credit is one of the most important factors in anyone’s ability to qualify for a mortgage. For this reason, it is important to always strive to protect your credit if at all possible. Unfortunately life happens, and it may be necessary to do something which can damage your credit. Last month, I had a customer from Plymouth who could not credit qualify for a mortgage, but with a little effort and hard work, his credit has improved and he is happily house hunting. If you’ve been in a situation which has negatively impacted your credit, there are some simple things you can do to start getting your credit back on track.

The first thing you should consider is pulling your credit. You can do this for free once a year through annualcreditreport.com, which is run by the credit bureaus. This gives you both your FICO score and your trade lines, allowing you to see where you are, so you know how much you need to improve, as well as what is on your credit report. If there are any inaccuracies, immediately dispute them through the credit bureaus. Common inaccuracies include multiple trade lines for the same debt (a credit card you have showing up 2 or 3 times as separate cards), late payments that weren’t late, and credit that you did not take out. Sometimes just getting your credit report updated can have an immense impact on your credit.

The next thing you want to do is consider the types of credit you currently have. It is important to have a good mix of revolving and installment loans when applying for a mortgage. So, if you have 4 credit cards and nothing else, it might be a good idea to get a car loan, personal loan, or student loan. Likewise, if you have a car loan and a personal loan, but no revolving lines of credit, a personal line of credit or credit card can improve your credit.

It is also important to look at how your debt is disbursed. If you have 3 credit cards and 2 are paid off but the third is maxed out, you might want to consider spreading that debt around between the cards. Credit lines which have over 50% used can negatively impact your credit, while those with no balance often do little to help. By adjusting where your debt is, you can significantly help your situation.

And if you have no credit, or credit which makes you ineligible for traditional credit options, a secured credit card or secured loan is a great option to consider. These cards and loans are secured by money which you put down in exchange for the credit. Once a preset period of time passes, your money is returned to you, and all the while you have been establishing positive credit.

If you have any questions about how your credit will impact your mortgage eligibility, or about the mortgage process in general, please contact me. And if you have any other tips for improving your credit, please leave a comment.