Avoiding Pitfalls Before You Apply For A Home Loan | Kathleen Beck 916-722-0395 | www.BeckHomeLoanPro.com

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There is a ton of information on the internet and other media about what you should do before you apply for a home loan.  I would like to go over a few of the myths about home loans that will hurt your credit rating.

Pay off and close all your open credit cards.  Paying off your credit cards is always a good idea.  In this case paying down your credit cards to 30% of the credit limit will really help bring up your scores.  However, closing open credit accounts in most cases will tend to drop your credit scores. 

The credit bureaus scoring models look at the total credit you have available to you verses how much you have used.  They also look at the length of your credit history, so an old credit card open in 1993 shows 20 years of credit.  When you open a new credit card for a lower rate or to transfer balances the credit bureaus take an average of the two credit cards and see you as having credit for the last 10 years, which can also lower your credit rating.

To summarize the information above,

Leave old credit cards and lines of credit open even if you have paid off the balances. 
Never allow your credit balances to be more than 30% of the limit of your credit line.
Only open new credit when you absolutely have too.

I will be writing a series of informational pieces for my blog in the weeks to come.  Please let me know what you would like me to talk about.

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