Credit Tips to a Lower Interest Rate

In a mortgage lender's eyes, a good credit score translates into lower interest rates for home-shopping borrowers.  The higher your score is, the less risk you are, and the more likely it is you will pay off your debt.  For this reason, borrowers with lower scores usually end up paying higher interest rate loans.

If this is you, don't panic.  Here are a few guidelines on what you can do to adjust your score and receive a favorable review from the underwriter:

Should I pay off all past due balances and charge-offs?
This is usually a good idea, but you only need to worry about the past due balances and charge-offs that have occurred in the last two years.  Items more than two years old have little effect on your current credit score.  In fact, if you pay off delinquent items over two years old, it can actually bring your credit score down - something you don't want to do.  Bringing that score up means you'll get a better interest rate on your loan.

Should I close existing credit card accounts that I don't really use?
"No!" Part of your credit score is based on your credit history.  Even if you don't use old credit cards much, you will still benefit from the credit history they represent.

Rather than trying to pay off all your credit cards, move part of the debt from one card to another to evenly distribute debt.  Try to keep the ratio of debt to credit limits at about 30% of the available credit or less.  If your credit provider will increase your line of credit, the ratio of debt to available credit is automatically reduced.

When married couples have separate credit card accounts, the debt can be transferred from one spouse to another to clear up credit issues for the other spouse.  That spouse with clean credit can be designated as the sole borrower on the loan, but ownership of the home can still go in both names.

Your Local Mortgage Services:

Don Frazier
Mortgage Consultant

Office:  765-446-2930       
Email:  dfrazier@tippecanoemortgage.com

Website: www.IndianaMortgageMan.com

Mortgage services for Greater Lafayette and West Lafayette Indiana, Purdue University, Tippecanoe County and the surrounding Indiana Communities.  We are a Local Company with a National Reach! Visit my website for great home loan information: http://www.indianamortgageman.com/