How important is your credit score when applying for a mortgage?

Your credit score will give the Lender a “snapshot” of your spending and payment history. They are trying to determine if you will make your mortgage payments by understanding how you have paid your bills in the past. The higher your credit score the lower your interest rate will be which results in a lower monthly mortgage payment.

What do the credit reporting agencies consider?

They will look at the number of accounts you have, (a/k/a trade lines) how long you have had them and if you have made your payments as required. They will also review any collections, liens or judgments.

Here are some tips:
Keep balances on credit cards no more than 30% - 50% of your limit
Don’t close unused credit cards as a short-term way to increase your score & don’t open new credit cards just to increase your available credit.
Pay your bills on time. Note: Even if you payoff a collection or close an account it doesn’t go away. Collections will continue to show on your report for seven years.

It’s always a good idea to keep an eye on the information that the credit agencies have on you by ordering a credit report at least once per year. You can obtain a free report once a year from each of the three agencies by visiting annualcreditreport.com or by calling 1-877-322-8228. The nationwide consumer reporting companies are Equifax, Experian, and TransUnion.