When buying a house and applying for a loan you don't want to make any major financial faux pas's or mistakes but some things that actually sound good, could harm your credit score without you knowing it. Here are 4 things not to do when applying for a loan or trying to increase your credit score.
#1. Don't pay off all collections.
I know it sounds smart and the right thing to do to pay off any and all debts and collection agencies that are calling but it may actually drop your credit score when you do. This is because you update the date of the last activity on a negative account and the credit algorithm thinks you have a new collection on your credit report.
#2. Don't close out credit cards.
Once you've paid off a credit card do everything you can not to put anything more on the credit card but also don't close it out. It will show that you have less credit available and will actually drop your credit score. Consider it this way, if you have $10,000 on two credit cards and both are maxed out you pay one off and cancel it, you technically now have one credit card that's maxed out, you're in the exact same situation. Leave it opens a creditor see you have credit available.
#3. Don't open any new credit cards or lines of credit.
Any time a creditor hits your credit report, it can ding your credit so while you're in the process of applying for a home loan don't open any other credit cards even if it's only a $100 credit card to your local or hardware store thinking you need new furnishings for your house.
#4. Don't max out your credit cards.
Creditors like to see available credit on your credit history and if all of your credit cards are maxed out it will continually drop your credit score.
For more information or to apply for a home loan for Columbus real estate, call me today!