Credit is a powerful financial tool. Having a good credit score is important if you want to take out a home loan in Leawood and get a favorable interest rate. However, even savvy consumers may be unaware of these sneaky credit saboteurs that can damage your credit score and prevent you from getting a home loan in Prairie Village.
1. Medical Bills
FICO recently changed guidelines that penalize consumers with medical bills that are in collection, but they still count. Even with this update, entries will only be removed if an account has been paid or settled through the collection agency.
2. Applying for Credit
Applying for numerous credit cards or loans can hurt your credit score. This sends the message that your current lines of credit are at their maximum. Hard credit inquiries represent 10 percent of your credit score.
3. Purchases and Rentals
Many companies run credit checks before setting up accounts, providing financing or renting cars. In-store financing is a sneaky credit saboteur because lenders see this as a last resort. Likewise, if you set up a new cable account or rent a car using a debit card, these will appear on your report.
4. Payday Loans
Payday loans don’t typically appear on credit reports from the three major bureaus, but they do show up on specialty reports used to determine if a customer is eligible for a home loan in Leawood. If you are sued for failing to repay a payday loan, this judgment will appear on your credit report.
5. Debt to Credit Ratio
Lenders don’t want you to use all of your credit. Maintaining high balances is bad, and maxing out your credit is worse. High credit use decreases your credit score. However, letting credit cards go inactive is also detrimental.
Taking steps to improve your credit score can pay off in lower interest rates and help you achieve important goals like buying your first house. If you’re applying for a home loan in Prairie Village or looking to refinance, First Mortgage Solutions can help. Our experienced loan specialists are committed to helping you find the best loan for your individual needs. It’s easy to start the application process online, or contact us at 855-222-5102.
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