By Sabrina Karl
Shopping around to find your best mortgage or refinance deal is always a smart move. But effort put into what you bring to the table – such as your credit score – is just as important.
That’s because mortgages are not “one size fits all”. Homebuyers with better credit are offered lower rates and fees. So if your credit history isn’t all it could be, and you can wait a bit before submitting a mortgage application, a number of savvy credit moves can boost your score to land you a lower-cost mortgage.
Although it’s the most obvious advice, maximizing your on-time payment history can’t be ignored, as it’s the single biggest factor affecting your score. If you have delinquent payments in your report, be sure you’re making all payments on time to extend your streak of no late payments as long as possible.
Almost as critical to your score is your credit utilization rate, which is how much of your combined credit limits you are using. For example, if you have $40,000 in credit available to you over several cards, and your current balances total $10,000, your credit utilization rate is 25 percent. The lower your rate, the better your credit score, so pay down balances where you can.
Then, don’t forget the two easy moves that are really non-moves. First, don’t apply for any new cards or loans in the months leading up to your mortgage application, as new credit requests ding your score. Second, don’t close your old accounts, since the further your credit history goes back, the better your score.
Although more goes into a credit rating than these four factors, these are low-hanging fruit that can make the greatest impact in the shortest time when you’re readying yourself to score the best mortgage you can.