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Getting Approved for a Mortgage Loan – Your Credit Score Matters

If you are looking to apply for a Mortgage Loan, one thing that is crucial to the approval process is your current credit score. It shows the lender how reliable you are with paying off debt. Naturally, the higher you are, the more likely your loan will get the thumbs up.

Whether you are just beginning to delve into the world of credit, or you’ve already entered it and are looking for ways to improve your score, we’ve got ways to help. A good credit score is important as it determines whether or not you will get approved for new credit cards, mortgages, loans, new cars, etc.

What is a Credit Score?

Essentially, it is a generated number ranging from 300 to 800 based off credit reports from your bank. Unlike golf, the higher number you have, the better it is. People tend to strive to achieve a score between 700 and 800, but once again, the higher number the better it is. With the average score in the United States being 698, we’ll share some tips and tricks to improve your number.

How to Increase Your Credit Score

  1. Pay off your debt – Loans, mortgages, credit card debt, student loans, and other forms of debt will weigh your score down. Find a way to pay them down. Whether that is sacrificing your bi-weekly Starbucks run or packing a lunch instead of buying it, use the money you save to pay off some debt. Every little bit counts as it shows you are actively trying to pay it down, even if it is a small portion at a time.
  2. Make your payments on time – Missing one payment can cost as much as 30 points to your credit score. Life happens and sometimes unexpected expenses arise. From having to fix something in your car or taking your pet to the vet, always be prepared to still pay your scheduled bills. In the event you are late on a payment, immediately call the creditor to explain the situation and reassure them it will never happen again. This may earn you some grace.
  3. Manage multiple accounts – Showing the credit union you can financially manage multiple credit accounts showcases responsibility. Do not go overboard with opening new accounts. Three to four new credit accounts within twelve to fourteen months is usually a good way to give your score a bump if you handle them well. Anything beyond that will negatively impact your score.

Maintenance, Maintenance, Maintenance

Once you have managed to achieve a good credit score, it is very important to maintain it. Continue doing the same three practices you were doing to improve your score and follow these general rules to keep your score in the green:

  1. Budgeting – Always track your spending. Set a plan to determine how much you can spend per month while still being able to pay down your debt. Usually, spreadsheets or budget tracking apps work best for this. If you are self-employed, make sure to keep track of all your expenses.
  2. Plan for the future – Sit down at the beginning of each month and really envision potential future expenses. If there are major or minor expenses, if you plan to upgrade your phone, or even want to go on vacation, there are many things in life that can happen to derail your credit score progress. It is always best to be prepared. The best time to do this is when you are planning your monthly budget.
  3. Examine what you buy – There tends to be patterns to what an individual buys. It is true that from time to time it is acceptable to buy a guilty pleasure item (e.g., a new gadget, clothes, video game, etc.). However, if you’re buying too much of one category of something, you are most likely over-spending. An easy way to do this is instead of eating out three times a week, lessen it to only once per week.

Good Credit = Higher Approval Rate

Successfully reaching a high credit score is an accomplishment you should be very proud of! For your Mortgage Loan Lender, Midgate Mortgage has the team of experts to help guide you to your dream home. Call us at 310-791-0854 to speak with a professional or you can visit our Contact Page to take a minute to fill out our form. We can help you get to where you want to be.