Credit RatingWhen you apply for a mortgage, there are two things you should know about your credit rating:

1) The better your credit rating, the more likely you will qualify for a mortgage.

2) The better your credit rating, the lower an interest rate lenders will likely offer you.

Your credit rating is not the only factor lenders consider.  They also look at your net worth and your current income, for example.  They will also consider the value of the property and the current state of the market for real estate, as well as the current bank rate or prime lending rate.  So don’t look for a precise correlation between your credit rating and the interest rate you will be offered.

But your credit rating is something in your hands to control, so it is worth making the effort to do so.  In fact, the time to start is at least a full year before you want to apply for a mortgage.

Make a timely payment

The most obvious step is to pay the next bill you receive right away.  Pay at least as much as is due, preferably more.  Whether it is a credit card bill, a cable bill, a car loan bill – whatever it is, pay it right away.

Then, pay the second bill you receive as soon as it arrives.

Here’s a handy tip.  Any payments that can be made through an automatic withdrawal should be.  That way, you can’t accidentally miss a payment.

Reduce credit card debt

Ideally, you will bring your credit card balance down to zero.  However, if this is not possible, at least make sure that not a single payment is late.   Work to get your balance below 30 percent of the credit limit as soon as  possible.  Yes, give up a trip or a few nights out if that’s what it takes to get the ball rolling.

Debt consolidation might be worth considering.  This would not reduce your debt, but if you can consolidate debt in an account with a lower interest rate, you stand a better chance of paying it off faster.  Usually this means moving credit card debt to some other form of debt.  But be careful not to let credit card debt build again, or else you will actually be worse off with both the consolidated debt and the credit card debt.

Get a credit card if you don’t have one

If you don’t have a credit card, get one.  Your credit card can be low for not paying credit card bills on time or from not having credit card bills to pay.  So get a card, use it at least a little, and – you guessed it – pay the bill the moment it arrives.

Ask for a copy of your credit report

It is important for you to verify that all the information is correct.  For instance, if the report says that your credit card is at 90 percent of its limit because the bank forgot to mention that the limit was raised ten months ago, that could cost you.  So double-check everything.  Everything.

Ask for good will

If you see on your credit report a couple late payments from companies with whom you have been an excellent and constant customer, ask them to erase the one  obviously uncharacteristic blemish.  A lender can do that for you.

Avoid applying for other loans

Applying for several loans at the same time is not a good thing.  If you need a car loan, apply for just one.  When it comes down to a mortgage, don’t apply at five or six lenders, because each one will pull out a credit report and that will cost you.  One of the advantages of using a mortgage broker is that your report gets pulled only once, even if applications are sent to a dozen different lenders.  You can hire a broker at

Don’t think in terms of “fixing” a credit score.

Credit scores cannot be fixed, as if they were broken.  There is no credit score glue.  All you can do is adopt credit-worthy habits, such as those mentioned on this page.  It is not a quick fix, but it is a real fix.  And after  a year of responsible credit management, you chances of getting a mortgage – and getting a good rate – will be vastly better that just 12 months earlier.

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