Three Credit Situations That Mean You Should Wait Before Applying For A Mortgage

Of course you know that you shouldn't think about trying to buy a house if you're in a bad position financially, but what other credit factors can affect your ability to get a mortgage? Here are three issues that can affect your credit score and ability to get a mortgage even when your finances are going great. 

1. Debt-free

Believe it or not, lenders don't look on debt-free applicants as necessarily responsible. If you've been living within your means and haven't had a need for credit or debt, you haven't been building up your credit score and lenders may consider you untested or unpredictable. They can't forecast how you'll handle debt once you have it if you've never had the experience before, and if you had debt far in the past but then paid it off and haven't sustained any debt in more recent years, they'll wonder if you'll still be responsible enough to pay them back. 

2. Recent late payments

Lenders realize that people change, so they prioritize the most recent activity on your credit history over something that happened five or ten years ago. This is great news if you made some bad financial mistakes in your youth that you've been working your way out of, but it's not such good news if you had a late payment show up on one of your accounts recently. Even if it was a clerical error and you successfully disputed it, that can still have an effect; lenders can also see that you've disputed something on your credit report and may not want to take the risk that you'll do the same once you're in debt to them.

3. Recently applying for credit

Applying for a credit card or personal loan gives you a little ding on your credit score. This is because the lender you applied to submits a "hard inquiry" and your credit report keeps track of these to help lenders notice if you're applying for credit everywhere and look desperate for money. But even if you recently applied for just one credit card, that can lower your credit score by several points, which can drop a pretty great credit score to an only sort of great one. If you're in this situation, you may wish to keep renting for another year or so and try to buy a house later after the hard inquiry has dropped off your report. 

These three situations are easily overlooked but, although they may seem minor in comparison to bankruptcy or insolvency, they can still have an effect on how favorably lenders will view you. And if you're planning something big like buying your own house, you'll want to make sure you're as prepared as possible so nothing can throw a wrench in your plans. Contact a company like Best Rates Mortgage, LLC home loans for more information about how your credit score may affect your ability to get a loan.