It’s no secret that mortgage lending is perceived as tight among borrowers. So if you’re looking to purchase a home, you’ll want to avoid any misconceptions that can impact your ability to qualify for a mortgage.
There are plenty of credit myths floating around. According to a recent TransUnion survey, 48% of respondents believed that their rental payment history was reported to credit bureaus by their landlord. It’s not. In fact, it’s just part of a long list of payments that aren’t reported like: utilities, cell phones, and cable/internet. So while timely payments are important, they’re not likely to increase your credit score.
Another misconception is that your credit score will drop each time you check your credit. Viewing your own report is counted as a “soft” inquiry and doesn’t affect your score one way or another.
If you’re in the market for a home and think it might be beneficial to “clean up” your report by closing old accounts, think again. Doing so can negatively impact your score as your credit history now appears shorter since the record of payment has ended and the account is marked as “closed.”
There’s another “don’t-do” if you’re hoping to become a homeowner: Don’t apply for new credit (i.e.: car loan, credit cards, etc.). In other words, resist the urge to apply for that home improvement card until after you’ve signed on the dotted line. Doing so prematurely could derail your plans since underwriters might worry that you’ll max out the credit line and default on your mortgage.
Some others that go without explanation are: don’t spend your savings, don’t change jobs (if you can help it), and don’t make any late payments. Following these simple rules and avoiding some common credit misconceptions can help put you on the path to mortgage application approval.