Before applying for a new home, check your credit report.

Deciding to purchase a home is a major life event. Some people may do it more than once, while others save and wait for a dream home and settle down. Whichever end of the spectrum you may find yourself on, checking credit history will benefit even the most well-seasoned tradesmen. Read through these helpful tips on how to ensure a healthy credit history.

Credit histories typically include a credit score and lengthier credit report. The credit score is your overall financial health at a quick glance. It’s like getting an A on a tough exam. The credit report is a more detailed entity that lists technical aspects and financial behaviors. Both are incredibly important in the home buying process.

Know your credit score! Many conventional mortgage lenders want a minimum FICO score close to 740. Typically, you should begin observing and looking into your credit score and report a few months prior to applying for a loan.

Credit reports are available to individuals and not just the institutions who give loans. It’s important for you to know what’s on your credit report and understand what’s in it. Just because you remember paying off that European trip from last semester in college doesn’t mean the record made it to your report. Sometimes errors happen. If you do find an error, contact the credit company immediately to find out what steps to take. It’s even better if you have documentation – receipts or statements showing that an account is up to date. It could take at least a month or more for discrepancies to drop away from reports. Even if you think you know what’s on your report, always check for accuracy.

Many companies like to see a utilization of credit under 30%. This means that at any given time, you’re not maximizing accounts but rather staying within a reasonable pay off range. Some prospective buyers fall into credit card traps when preparing for a mortgage. It’s tempting to open new lines of credit in order to boost your score. However, accounts opened within six months of a mortgage application can actually hurt your score. The same goes for closing old credit lines. Even if they aren’t being used often, they still help your credit ratios. An important element to credit is how long credit has existed for an individual. If older credit lines are closed, it can negatively affect scores.

Before you seek mortgage preapproval for a home purchase or build, contact your lender and the credit reporting agencies to make sure all aspects of your credit are in top shape!