When it comes to buying a home, your credit score is going to factor into whether you get approved for a mortgage. If you are currently working on improving your credit, so you can get into the home of your dreams, you will want to avoid these five costly credit mistakes.
#1: Maxed Out Cards
Having maxed out credit cards cause your credit score to go down by anywhere from 10 to 45 points, depending on what your current credit score is. Did you know that the higher your score, the more it is impacted when you make one of these mistakes? For example, if you have a credit score of, say, 680 and you have a maxed out card, it can impact your score between 10 and 30 points. But if your credit score is, say, higher, maybe a 780, then maxed out cards will impact you between 25 and 45 points.
#2: Avoid A 30-Day Late Payment
Do not allow yourself to get a 30-day late payment. If you do, it negatively affects your score anywhere between 60 and 110 points, so you want to pay your bills on time, every time!
#3: Debt Settlement
A debt settlement drops your score from 45 to 125 points, but don’t let this keep you from settling debt. If you have a “CHARGE OFF” on your credit that does not mean you aren’t responsible for the debt. You are. Lenders want to see you are taking care of it, regardless of whether you settle for pennies on the dollar.
A foreclosure is devastating to your score. It drops it between 85 and 160 points, but you can bounce back from a foreclosure. The best way to move forward is to meet with a lender and create a path forward to rebuilding your credit.
Lastly, bankruptcy will impact your credit score the most. It can drop it anywhere from 130 to 240 points. Again, it may feel impossible to recover from, but it’s possible as long as you plan ahead for your credit repair.
If you are dealing with any of the above credit mistakes, do not beat yourself up. Your best course of action is to meet with a trusted lender who can give you the best path forward to boost your credit and help you score your dream home. If you need a list of trusted lenders, I’d be happy to send you one.
To learn more about maximizing your credit, click here.