Hello and Happy Monday!
A common misperception in the mortgage process; Applying for a home loan will hurt your Credit. This is a Mortgage Myth.
Many fear to have their credit pulled for when applying for a home loan. Note; a consumer credit pulls vs. mortgage credit pulls. When one has their credit pulled for a car, department store, etc the score will drop significantly more than a mortgage pull. Why do you ask? The mortgage company does ONE pull for their company whereas a car dealership will pull your credit ONCE, but then fish out the best rates available from financial institutions causing more pulls under the initial.
Many factors go into one’s credit score; let’s break it down to 5 parts.
15% Types of Credit
Having a combination of revolving credit cards and installment payments with an excellent record of payment will improve your score.
20% Amounts Owed
Keeping a higher line of credit while maintaining a low credit balance each month is the best way to booster your score. Don’t be afraid to use your credit and remember the 30% rule. Keeping any credit balance below 30% will keep your score up.
15% Length of Credit History
Having an established credit history and maintaining a record of payments on accounts helps raise your score significantly more than if you were to open a new account.
15% New Credit
Do not open new accounts just to transfer balances for an introductory rate or a discount. This can lower your score or you could be walking into a trap.
35% Payment History
It may seem obvious but missing a payment on any line of credit can be significantly damaging to your credit score; missing a mortgage payment alone could cost you 100 points!
Have more questions about the home loan process? Give me a call today and set your mind at ease. It’s a great time to buy even during a pandemic! Interest rates are at an all-time and we predict they will stay this way for some time. Want to know why? Call me!