Helpful Tips for Sprucing Up Your Credit Before Reapplying

December 3, 2020
Last updated:
January 27, 2022
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Applying for a mortgage is a delicate process that involves your income, assets, credit score, and financial stability—just to name a few factors. If you do not get approved the first time around, all hope is not lost. Instead there are several things you can do to improve your chances when you reapply.

If you have had some trouble getting a mortgage or getting approved for a mortgage recently, you are not alone. Many individuals face mortgage challenges due to past blemishes on their credit reports or a personal financial crisis that resulted in bills not being paid on time.

In this post, we will share a few helpful tips for sprucing up your personal credit before reapplying for a mortgage. With a bit of luck and hard work you can be on your way to purchasing that new dream home.

Pay Off Your Credit Cards And Lines Of Credit

The easiest way to improve your credit score and prove that you can afford your mortgage payments is to eliminate other forms of debt from your monthly budget. If you have outstanding credit cards, student loans, or other obligations, get them paid off as quickly as possible. Of course, this may be easier said than done for many. So, if paying off all debt is not feasible right now, then pick the debt with the highest rate and pay that down first or as quickly as possible.

Along those same lines, you should avoid taking on any new loans while you are trying to get your mortgage approved, as these are likely to show up on your credit report and can hurt your chances at approval.

Pull Your Credit Report And Look For Errors

Moreover, if you have not seen your credit report recently, it might be worth investing in a copy so you can see exactly what your lender sees when they are evaluating you for a mortgage. You may discover that there are errors or inaccuracies that can be cleared off with a quick phone call, such as a past loan that was fully paid or a missed car payment that was reported in error. Every credit report error that you can fix will bring you one step closer to your mortgage approval, so spend a few minutes combing through your report.

Pay All Of Your Bills On Time

Did you know that every overdue bill can leave a negative mark on your credit report? With so many bills to juggle – credit cards, cell phones, utilities and more – it can be tough to keep them all organized and paid before the due date. However, if you are working to secure a mortgage you must keep your bills paid to avoid being reported as a late or overdue payment.

If you have had some trouble getting a mortgage in the past, take a few minutes to contact your local mortgage professional today to ask for their advice. You may find that they have additional tips and strategies that you can leverage to better your chances of being approved. Remember, even one late payment can lower your credit score by several points, and it can stay on your record for years. Of course, the effect of any single late payment will decrease over time, but the best way to improve your score is to make consistent timely payments.

Add Other Credit Accounts

Furthermore, for those who are just getting started in the wonderful world of credit, you will need to find ways to build a positive credit history. One way, in particular, you can do that is to link other credit accounts like your utility or phone bills to your account. Credit Report Agencies like Experian offer free linking tools that have been proven to increase credit scores.

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Keep Your Balances Low

Whether you are starting to build up your credit or you are a seasoned vet, keeping your balances low is yet another way to improve your credit for the next time you apply for a mortgage. In fact, you will find that your score will be higher when you avoid consistently maxing out your credit cards. In general, you should strive to use only 30 percent of your limit, at most. Alternatively, if you can use even less than 30 percent, your credit score will thank you. Applicants and borrowers with perfect credit, on average only use about 7 percent, just to give you a better picture of what low balances can do.

Avoid Closing Unused Credit Accounts

After finding out that you will need to reapply, you may think all hope is lost. But the truth is you just need to manage your finances a little better. If you are like most people, you may be tempted to close out unused credit accounts or cards that you never use anymore. However, this will have more of a negative impact on your overall credit score than a positive one. Closing it would increase your ratio of debt to available credit lines and could pull your score down. As a result, the best thing you can do with accounts like these is to keep them open and unused.

Guard against outside inquiries

Last but not least, if you have to wait a while before you can reapply for a home loan or mortgage, there is a strong likelihood that you may need to make a significant purchase or even open a new line of credit. That said, if you need financing of any kind, i.e. a car loan, a new line of credit, or a personal loan, remember that inquiries of all the above items will show up on your credit report. Consequently, during your loan application process, you could see your score drop due to the fact that you are trying to take on more debt. Therefore, if you are shopping for a mortgage, it is vital that you guard against outside inquiries as much as possible.

Ultimately, these are just a few things you can do to improve your score moving forward. Thus, if you would like to know more or are thinking about making a significant change to your finances, you should speak with your loan officer or lender first to ensure you do not reduce your chances of being approved for a mortgage the second time around.

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Ready to Apply For a Home Mortgage?

Do you have questions about home loans? Are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.

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