4 Credit Secrets to Know When Buying a Home

Credit scores are often one of the most mysterious or confusing parts of getting qualified for a loan.  Here are a few of my tips to keep in mind when you're looking to get approved for a mortgage. 

1. Not all credit scores are created equal!

Keeping an eye on your credit through services like Credit Karma is a good idea to make sure there are no major issues and to see if you score is trending up or down, but don't count on the score they provide.  There are a number of different credit scoring models used to calculate your credit score and they can be very different from what a lender will use when you apply for a mortgage.  For example, Credit Karma uses a Vantage 3.0 model whereas Mortgage Lenders use a FICO scoring model which weighs heavier on delinquencies.

2. Closing accounts can hurt your score.

The ratio of the amount of credit you have available versus how much you have used (known as credit usage) will impact your score.  If you reduce the amount of credit you have access to by closing an account, your credit score will be lower. Keep your accounts open even if there is no balance.

3. You can opt out of solicitations.

When your credit is pulled by a lender, the credit bureaus (Equifax, Experian, and TransUnion) will automatically report to all the other lenders that you are in the market for a loan.  This triggers a flood of unsolicited calls, emails, and calls from lenders who are trying to earn your business.  Before you apply, you can opt out by going to optoutprescreen.com.

4. You don't have to pay a credit repair service.

A good mortgage lender can take a look at your current situation and guide you on the steps to take in order to improve your credit.