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Article published by : navjeet on Tuesday, September 30, 2014 - Viewed 988 times

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Category : Real Estate

Improve your Credit Rating Prior to Applying for Mortgage



There is no secret to it that your credit rating plays a major role in influencing your qualification for mortgage. Having a lower credit score means your chances of getting approval for home loan are also less. Even if you somehow manage to get the approval, you would have to deal with higher interest rates, thus expecting bigger monthly payments. It is due to this reason, adopting required measures to improve the credit score is necessary before applying for the mortgage to secure an affordable loan option. Below mentioned are a few ways by which you can ensure the same.

Be clear of your requirements. You should have a precise idea of what you need so that you can channel your efforts accordingly. Contact your lender and know with what credit score you can apply and qualify for mortgage without any hassle. The lender, after analyzing your present financial position, will assist you in knowing whether you can secure a top deal with your current credit score or it has to be better. The better your credit rating is, the more affordable loan you can get, thus saving a lot over a period of time by making lower monthly installments throughout the tenure of loan.

Repay your debts and other financial liabilities as fast as possible and as much as you can. Paying off your debts will not only enhance your credit score, but will also lower your debt-to-income ratio. As the ratio is taken into account by the banks to determine how much of your income goes towards your debts, you can secure an easy approval with lower debt-to-income ratio. The most proficient way of repaying your debts is by utilizing every extra and small amount of funds for this purpose. You can confine your spending for some time if your score is badly hurt.

Make wise use of your credit cards. Identify the limit on each card and make sure not to spend more than what you can afford with all pending financial liabilities. Try to use up as less as possible. Since the amount is to be repaid by you, spending more than your affordability can make it challenging for you to repay debt in full each month. It is ideal to use all your cards and terminate the ones that you no longer use. Also, ensure not to purchase any new card.

When you are looking forward to obtain a mortgage, do not make the mistake of getting any loan prior to that. Applying for new finances will not improve your credit score; rather it will have bad impact on your debt-to-income ratio. Try to avoid applying for lines of credit and consumer loans before applying for mortgage. Furthermore, there are many people who opt for debt consolidation, considering it to improve their credit score. Avoid this strategy of enhancing your credit rating. Do not consolidate all your outstanding debts into a single loan. This move will only hurt your credit score further.

Be disciplined with your payments. Pay your bills and taxes on time. If you are responsible, you are sure to get better terms on your home loan.

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