If you are shopping for a mortgage it’s advised to take some time to review your credit history before applying to a prospective lender. Much like the amount of money you are putting down on a property, and your assets (consider collateral), credit plays a big part in the rate, program, and the decision a bank makes in their loan approval processes.

It’s advised to order your credit report from all three credit bureaus to check for accuracy and any discrepancies that you may not be aware of. Doing this before applying for a mortgage can save a lot of time and energy in correcting issues that could slow the application process down or cause difficulty in obtaining a mortgage. If your credit score needs improvement, take some time to seek assistance before contacting lenders.

In today’s market, a credit score below 700 may cause a significant increase in rate and the programs available. Additionally, it can affect the total loan amount, which can hinder closing on a desired property. It’s the same case with refinancing an existing mortgage when it comes to credit history.

What can you do to improve credit before applying for a mortgage?

Talk to a Credit Counselor:

A credit counselor can guide you on how to pay off debt effectively, or consolidate consumer debts to improve cash flow. Some debt (education, real estate) is sometimes best left untouched, while consumer debts can be consolidated. Seeking the help of a professional will put budgeting in perspective and improve your financial health before taking on additional debt. (Mortgages) Generally, services of this nature are fee based, so it’s advised to find out if there are upfront costs or if debts will be rolled into a manageable term attached to an interest rate.

Consult with a Debt Negotiator:

In extreme cases when borrowers may be facing bankruptcy, a debt negotiator will work with creditors in collecting portions of funds owed as a means of collecting what has been previously owed over a designated time period. Many debt negotiators will charge a fee for a service of this nature; however it may help ease the tension of not being able to fully pay-off creditors, or filing for bankruptcy. In extreme cases such as these, success with negotiating debt can help a borrower refinance from an ARM program that has adjusted to a higher rate, to a more affordable fixed rate mortgage. The philosophy behind consolidations and debt negotiation is to prevent the borrower from filing for bankruptcy and continuing to pay debts and obligations on a regulated basis.