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Top Tips For Mortgage Shopping That Won’t Negatively Impact Your Credit Score.
1. Look Around For A Short Amount Of Time
Once you’re ready to obtain pre-approval for a mortgage on a property you want to get, you’d likely want to look at offers from various lenders. However, it is best to do so within a month and a half. When you do this, the credit inquiries from the various lenders will appear as one inquiry. When you get one inquiry, this will affect your credit score, however, the impact will be much less than many different inquiries from different institutions.
So, you should strive to get prequalified first beforehand so that you’ll have a bit of extra time to look at the various rates and fees involved.
2. Get Prequalified
Next, you should get prequalified to get your mortgage. There are lenders who refer to this as a rate check. It is a smart idea if you’re worried that your credit score would get hurt by doing comparison shopping. Now, in order for lenders to prequalify you, they will have to look at your credit report. They will do a soft inquiry which means that they will look at your report without it having a negative impact on your credit score.
Hard inquiries on the other hand occur when you get your pre approval and officially apply to get the loan. This would actually hurt your credit score. Therefore, doing prequalification is a great way to look around at different rates and fees without risking your credit score.
You should remember that even though prequalification will reduce your credit score damage, it is not a substitution for preapproval when you are ready to commit. Due to the fact that it is currently a seller’s market, you do need to get pre approval so that you can show sellers that you’ll be able to get the financing you require to purchase their property if they accept your offer.
3. Delay On Applying To Get New Credit
In the event that you’re thinking about getting a loan or new credit card while you’re looking around for a mortgage, this would result in many types of inquiries for various credit types. This will have a negative effect on your credit score which means that you’ll have problems getting a good mortgage rate. So, it is best to wait until you are finished getting your mortgage before you look into any other types of credit.
4. Look At Your Credit Report
Before you go to get a mortgage, you should be aware of your own credit. So, make sure and check your own credit report before you go looking for a mortgage. This will help you to be proactive and fix any problems with your report so you can be in a great position to get a low rate without racking up many credit report inquiries.
It is possible to get a copy of your credit report for free at any of the main credit reporting agencies. You can check annualcreditreport.com for details. Do keep in mind that it won’t affect your credit score.
5. Pay Off Debt
In the event that your credit score needs to be improved, one way that you increase it is to pay off debt. For example, if you have outstanding credit card bills, you should pay it off. It is best to pay it off fully since you’ll get bonus points for doing so.
When you pay down on your debt, it will also lower your debt to income ratio. This will also enable you to qualify for a larger mortgage and even get much better terms.
Summary
It is extremely important to protect your credit score, even if you’re not looking to get a mortgage right now. Once you do get approval for your home loan and are closing the deal, make sure that you maintain a good credit score. You can do this by paying off your debt on time, avoiding getting additional credit etc.