Your Credit and Your Mortgage: What to Check Before Applying

Your credit history is one of the first things a lender looks at when you apply for a mortgage. It helps determine which loan programs you qualify for and how your loan is priced. It is not the only factor, but it is one you can often improve with a little planning.

Start by Reviewing Your Reports

You have a credit report with each of the three major bureaus: Equifax, Experian and TransUnion. You can get free copies through AnnualCreditReport.com, the official site for free reports. Look at all three, since they do not always match.

As you review, look for:

• Accounts you do not recognize
• Payments marked late that you made on time
• Balances or credit limits that are reported incorrectly
• Old debts that should have aged off your report

If you spot an error, file a dispute with the bureau reporting it. Fixing a mistake can take some time, so it is smart to check well before you plan to apply.

What Moves Your Score

Payment history

Paying on time carries the most weight in most scoring models. Even one recent late payment can have a noticeable effect, so automatic payments or reminders are worth setting up. If an account is past due, bringing it current is an important first step.

Credit utilization

This is how much of your available revolving credit you are using. Lower is better, and many experts suggest staying below about 30% of your limits. Paying cards down before the statement closing date can help your reported balances look lower.

New credit

Each new application can create a hard inquiry, and new accounts lower the average age of your credit. In the months before buying a home, it is usually best to avoid opening store cards, auto loans or other new lines.

Length and mix of credit

A longer track record helps, which is one reason not to close old cards you have managed well. Having a mix of account types, such as a card and an installment loan, can also play a small role.

Imperfect Credit Is Not a Dead End

Many people assume a past setback disqualifies them. In reality, lenders look at the overall picture, including your income, debts and savings. Some programs, such as FHA loans, are designed with more flexible credit guidelines; FHA typically allows 3.5% down with a score of 580 or higher. Negative items also tend to matter less as time passes and you build a record of on-time payments.

A Simple Pre-Application Checklist

1. Pull all three credit reports and dispute any errors.
2. Bring past-due accounts current.
3. Pay down revolving balances where you can.
4. Pause new credit applications and large financed purchases.
5. Keep older accounts open and in good standing.
6. Talk with a loan officer before you start shopping.

Give yourself time. Some improvements, like paying down a balance, can show up on your report within a billing cycle or two, while disputes and rebuilding after a setback can take longer. Starting several months before you plan to shop gives you room to make progress without feeling rushed.

That last step matters more than people realize. A loan officer can review your credit with you, explain how it affects your options and suggest which changes are likely to help most. Sometimes a small move, like paying one card below a certain balance, can make a difference.

Get a Clear Picture

You do not need perfect credit to buy a home, but you do want to know where you stand. Explore your loan options, then connect with a FLO Mortgage loan officer to review your credit and build a plan that fits your timeline.

This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.