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Improve Your Credit

Eight Ways to Improve Your Credit

Credit scores, along with your overall income and debt, are a big factor in determining if you'll qualify for a loan and what loan terms you'll be able to qualify for. These eight tips will help you secure the loan you need to buy that home you have dreamed of owning.

  1. Check for errors. Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else's poor financial management.

  2. Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score.

  3. Avoid your limit. Don't charge your credit cards to the maximum limit.

  4. Taking your time. Wait 12 months after credit difficulties to apply for a mortgage. You're penalized less for problems after a year.

  5. Secure your loan before other purchases. Don't order items for your new home you'll buy on credit—such as appliances—until after the loan is approved. The amounts will add to your debt.

  6. Do not apply for new credit. Opening new credit card accounts before applying for a mortgage can hurt your chances. Having too much available credit can lower your score.

  7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

  8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, Knowing and Understanding Your Credit, visit www.homebuyingguide.org

www.REALTOR.org/realtormag Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® . Copyright 2003. All rights reserved.