Here are five ways you can improve your credit score to get the best rate possible.

Know Your Score

It is a good idea to know your credit score before you take on any big investment. After paying off debt, it can take some time to see the change reflected on your score. This is why we recommend checking your score annually.  Visit www.usa.gov/credit-reports for information on how to check your credit report.

Identify and Fix Errors

Once you have your credit report in hand, it is important to take a close look and ensure there are no errors. You want to look at your accounts and balances to verify they are at accurate amounts. Keep in mind it may take a while for balances to be updated on your credit score after a recent payment. If you notice any errors or suspicious activity on any of your credit reports, contact the credit bureau issuing that report and have them correct the information.

Pay Down Debt

Not all debt is inherently bad, but having a lot of revolving debt makes you less appealing to lenders. It is a good practice to pay off as much as you can. At the least ensure you make the minimum payment each month, and if possible, aim for a larger amount. It may be beneficial to consider asking for higher credit limits. Higher limits will improve your credit utilization — if you don’t increase your balance to match.

Don’t Miss Payments

Keeping your accounts in good standing is more important than you think. Even missing a few payments can bring down an otherwise excellent record. Setting up automatic payments using a bank account routing number is the best way to ensure no errors are made.

Limit your Credit Inquiries

It may be tempting to apply for loans and cards due to intriguing bonuses and benefits, but all these applications generate hard credit inquiries. Be mindful of inquiries you decide to opt-in for and be confident that you will be approved. It is important to remember that no matter how tempting, every single inquiry shows up on your credit report and can easily hurt your score.

The more you know about your credit, the easier it will be to work on improving your score. Most credit scores range from 300 to 850 and rank from bad to excellent. Having a higher score shows the lender you are at a lower risk of deficiency and therefore receiving an offer for a lower interest rate. You want to aim for a credit score between 720 and 850.

Each positive action is one step closer to receiving the best interest rate possible and landing your dream home!

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Why is my Credit Karma score different than the credit score my mortgage Loan Officer is using for financing?

This is one of our most commonly asked questions, so we’d like to offer an explanation.

Most people assume that their Credit Karma score is their universal credit score when applying for a home or auto loan. When their true mortgage credit score is pulled by their Loan Officer, shock and anger typically follow. Why are they different? Did the Loan Officer pull the wrong score?

Credit Synergy said this: “The information that was pulled by Credit Karma is the same that their mortgage loan officer pulled…. the only difference is the algorithm being used. Credit Karma utilizes a Vantage scoring model, while the mortgage industry utilizes three FICO algorithms: Beacon 5.0, Classic04, FICO V2. The Vantage algorithm being used by Credit Karma is typically 50 points or so higher than a mortgage FICO score.”

Mortgage FICO scores analyze your payment history, the number of years you’ve had credit, types of credit accounts you have, and more. These tend to be much more detailed than the reports pulled by Credit Karma and other consumer credit reporting companies.

We know it’s confusing. And some of our customers’ first instinct is to reach out to a second mortgage company to compare their credit score.

Rest assured, it doesn’t matter what mortgage company or what Loan Officer pulls your credit score. The scores will always be the same when you’re applying for a mortgage (and will always be different than your Credit Karma score).

If you have more questions about your credit, or would like to apply for a mortgage with one of our experienced Loan Officers, please reach out. We’re here to help in any way we can.

Thank you for trusting us to guide you home!

The post Why is my Credit Karma score different than my mortgage credit score? appeared first on Mortgage 1, Inc..

You spend years building your score – here are a few tips to help you maintain it.

1. Make your payments on time. According to experts, a large portion of your credit score (35 percent, to be exact) is calculated based on payment history. Making your payments on time (within 30 days of the due date), every time can greatly impact your score. This includes credit card bills or any loans you may have, such as auto loans or student loans, your rent, utilities, phone bill and so on.

Consider setting up autopay when it’s available so you don’t run the risk of missing payments.

2. Keep your balances low. 30%. That’s the magic number! As soon as your credit card balance exceeds 30% of your credit limit, your credit score will decrease. Your score will continue to decrease until you bring your balance below the threshold.

Experts recommend that you pay off your entire balance every month. We know that’s not always realistic, but you should always at least make the minimum payment.

3. Be cautious when opening new accounts. According to Experian, “Each application can lead to a hard inquiry, which may hurt your scores a little, but inquiries can add up and have a compounding effect on your credit scores. Opening a new account will also decrease your average age of accounts, and that could also hurt your scores.”

There is one exception to this rule. If you’re shopping for a new car or home, it’s OK to shop around and have multiple lenders pull your credit. If these credit pulls occur during the same time frame, they are often ignored by credit bureaus.

4. Check your credit score regularly. If you practice tips 1 – 3 but forget to do #4, you’re setting yourself up for possible risk. Mistakes are known to happen, and reporting errors can have a negative impact on your score. If someone steals your identity and opens a new line of credit in your name, how will you know if you don’t regularly monitor your score?

You are entitled to a free annual credit report from each of the three credit reporting agencies. Click here to order your free reports.

If you find a credit reporting error, dispute the mistakes with the appropriate credit reporting agency and your score may improve.

If you have additional questions about your credit score, give us a call! We’re happy to help in any way we can.

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Whether you’re in the red or in the green, your credit score is key.

Here’s more about credit scores and the impact they may have on your home-buying experience.

Question: What elements of the home-buying process are affected by credit score?

Answer: Credit scores play a big role in all aspects of the home-buying process. First, it determines whether or not you qualify. It also determines the type of loan you qualify for and the interest rate associated with that loan. Your credit score will also determine if you qualify for a loan assistance program or are able to get a better rate on private mortgage insurance.

Question: If a customer is interested in working with us, what should be their target credit score?

Answer: Typically, we like to see at least a 620 credit score for customers pursuing an FHA loan. We can be a little more flexible with a VA loan and service customers with a 600 score. We ask that our Conventional customers aim for a 680, but with a good mortgage history, we may be able to offer Conventional financing to customers with a lower score.

Question: If buyers fall short of our target credit score, what steps do you suggest they take to improve their score?

Answer: A credit card, also known as a revolving line of credit, has the biggest impact on credit if you desire a quick turnaround. If you have a credit card, use it wisely. Always make your payments on time and keep a low balance compared to your card limit. For clients who do not have a credit card, we recommend that you get one right way and start using it. Remember, credit cards are a great tool to improve your credit, but if used inappropriately, they can negatively impact your score.

Shopping for your dream home is far more exciting than credit scores and mortgage loans, but both are equally important.

“Many times, shoppers get excited about a home rather than a mortgage, which is totally understandable. However, when they are not able to move forward with the process of actually purchasing a home, it causes them a great deal of frustration.”

In today’s competitive market, it is especially important to speak with a knowledgeable lender so you can actually find the house of your dreams and obtain financing.

To avoid the letdown, our goal is to establish a healthy relationship with each one of our customers. We aim to educate and offer advice for each client’s unique situation.

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