Avoid These Credit-Affecting Steps In Advance Of Buying A House
In the weeks and months leading up to looking at homes for sale, it's imperative that you keep your credit rating as high as possible. When you apply for a mortgage, the lender will check your credit rating and review your credit history, and if there are any concerns about your financial situation, you may have trouble securing a mortgage to buy your house. Paying all of your bills on time and making regular payments on any loans that you currently have is imperative at this time, but you should also be wary of other activities that might temporarily affect your credit rating at this critical time. Here are three things to avoid.
Buying A Vehicle
Buying a vehicle and making regular payments on it can actually help your credit rating in the long term. However, this isn't the case in the short term. The credit activity in this case, making a significantly large purchase on credit, can cause your credit rating to drop slightly before eventually rebounding as you make your payments. The problem in this situation is that if your home lender checks your credit rating soon after it has temporarily dropped, it may impede you from getting a mortgage. While you can't always hold off buying a vehicle, it's ideal to avoid this sort of purchase before buying a house if you're able.
Getting A New Credit Card
Although lots of people get by with just one credit card, others feel more comfortable having two or more cards. Similar to buying a vehicle, a second credit card on which you make your payments on time and avoid carrying a balance can improve your credit rating over time. However, the credit activity that comes with taking out a new credit card can cause your credit rating to drop a little for a short while. For some people, this might not be an issue, but if your credit rating is already on the lower limit of being able to get you approved for a mortgage, you don't want it to drop any further.
Taking Out A Loan
People take out loans for a number of reasons. Some people opt for loans just to pay their bills when their credit cards are maxed out, while others get loans from their financial institutions to help with starting a small business, for example. Taking a loan is another thing that can temporarily affect your credit score and make it more difficult for you to get a mortgage to buy your home. If possible, avoid this type of financial decision in the time leading up to wanting to shop for a new home.