When applying for a housing loan, having a high credit score is paramount. Apart from increasing your chances of approval, it gives you the power to ask for more favorable interest rates.
However, you might be ruining your credit rating without realizing it. To stay off the path of credit self-destruction, a Lancaster review would tell not to do the following:
Canceling Your Credit Cards at Once
Avoiding debt accumulation is one thing, but closing your credit accounts is another. You need credit cards to build a good credit history, which is why cancelling all or some of them may not be a good idea.
This is especially true when your oldest credit card is in question. The length of your credit factors into credit scoring; it accounts for about 15% of the computation. Closing your oldest account is like flushing all of your positive records down the drain. Without a long credit history, lenders will find it difficult to determine your creditworthiness, which can be bad news for you.
Keeping Your Credit Limit the Same
When your expenses keep getting higher but your credit limit doesn’t increase, your credit utilization would only go and stay up. Lenders like borrowers that only use 30% of their credit limit because it demonstrates good money management and sound purchase decision-making.
If your credit card provider hasn’t asked you already, proactive request for a raise. If you don’t have a history of delinquency, the other party might double your credit limit in a heartbeat.
Applying for More than One Loan in a Year
Every time you apply for a loan, the lender would run a credit check for risk assessment. This would result in an inquiry. Having multiple inquiries over a short period send the negative signals to lenders, showing that you’re acquiring too many debts.
Waiting for some accounts to be paid in full or spacing your loan requests to 12 months is good practice. After all, an inquiry won’t impact your credit score after one year has passed.
Be mindful of every financial decision you make. If you’re not careful, you might compromise your position, and blow your chance to get the most suitable housing loan for your needs.