The Credit DO's and Don'ts
The following are some helpful tips to avoid the credit mistakes many borrowers make during the loan process.
DO
- Know your credit facts and consumer rights
- Check your credit file (report) for accuracy, see next page
- Pay bills on time!!
- Keep balances on credit cards under 33%
- Ask creditor for 1 time courtesy to remove a late date on your account
- Watch inquiries – excessive inquiries diminish rating; however, inquiries don’t drop your score as much as people tend to believe (usually it’s only 1-5 points), and it’s important to note that while shopping for a mortgage you have a 30 day window in which only the very first inquiry actually affects your score
DO NOT
- Do not close revolving accounts – you need to keep your oldest accounts still active since payment history is a key part of your credit score
- Do not open any new credit before a new loan since this might temporarily lower your score – however, if you are months away from the purchase, and you have little or no active revolving debt (credit cards), adding a new credit card account and keeping it current might help your credit score
- Do not pay off old collections if you are about to apply for a loan – recent activity on an old derogatory account will usually drop your score initially; however, as the months pass, those paid collections will eventually start to bring your score back up
