I’ve kept track of my favorite Do’s and Don’ts over the years of things you should and shouldn’t do, between the time you apply for a mortgage and the time you close on that mortgage in your new house:
- Don’t apply for new credit. Every time you have your credit pulled by a potential creditor you can lose points from your credit score immediately.
- Don’t Pay Off Collections or “Charge Offs.” If you want to pay off old accounts, do it through escrow, making sure that the debt is yours.
- Don’t Close Credit Card Accounts. If you close a credit card account, it may appear that your debt ratio has gone up. Closing a card will affect other factors in the score, including credit history.
- Don’t Max Out or Over Charge Credit Card Accounts. Try to keep your credit card balances below 30 percent of their limit during the loan process. If you pay down balances, do it across the board.
- Don’t Consolidate Your Debt. When you consolidate your debt onto one or two credit cards, it will appear that you are “maxed out” on that card and you will be penalized.
- Don’t Buy a New Car or New Furniture On Credit. It’s very tempting to buy big ticket items as you get ready to move in to your new home, but wait on these purchases until after the loan funds.
- Do Join A Credit Watch Program. Then, you may check your own credit reports regularly (you won’t get dinged for a “hard” inquiry). Plus if something unexpected does show up, you can address it promptly.
- Do Stay Current on Existing Accounts. Your mortgage and car payments need to stay current-one 30-day late notice can cost you.
- Do Continue to Use Your Credit As Normal. If it appears that you are changing your pattern, it will raise a red flag and your score could go down.
- Do Keep in Contact With Your Loan Officer. Your loan officer may be able to supply you with the resources you need to stop any derogatory reporting at the bureaus. Ask us for details!
You might not be aware that just before your loan funds, your credit usually gets pulled one last time by the bank, to verify that everything is still essentially the same as when you were approved. For most people, this can be 30+ days after they were approved in underwriting and months after they were pre-qualified. You must manage your credit during this final critical stage as closely as ever, particularly as lending practices tighten up.
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