If you are going to be in the market for a mortgage loan in the next 6 months to a year, now is the perfect time to start brushing up your credit.
The first step is to pull copies of your credit reports and get your FICO score so that you know exactly where you stand. You’ll be able to see both the positive and negative remarks affecting your credit, and take steps to correct them.
At a minimum, you should:
- Work to bring all of your accounts current
- Pay all balances due on time each month
- Pay your other bills, such as utilities, on time each month
- Consider paying off all of your older revolving debt with a
low interest loan from your bank
It is also important that you don’t have too much activity or too many recent inquiries on your credit report when you apply for a mortgage. Be careful about opening new lines of credit.
As you analyze your debt relative to your lines of credit, you might be tempted to have older inactive or closed accounts purged from your report. However, you’re often better off leaving those accounts in. An older account showing a $0 balance or ‘pays as agreed’ is a positive factor in your score.
Once you’ve improved your credit and taken clean up action based on the last credit reports you ordered, it’s time to pull them again to get the updated versions reflecting the positive improvements to your history and score.
If you like, you can ask your mortgage lender in advance which bureau they intend to pull your report from, provide them with your own copy, and avoid them generating an additional inquiry into your account.