If you are about to apply for a mortgage, then, you are probably thinking about your credit score and what you can do to polish up your credit report. There are several things you can do to help your case. It is not only about getting mortgage-approved but also about locking in low interest rates. To get there, you will have to take care of your finances and credit card debt.

First, check your credit history to see where you stand. The lender will certainly take a peek into your finances, e.g., your income and if it is enough to cover a mortgage, did you have any loans in the past, the amount you borrowed, did you pay on time, etc. You should also check your credit report for mistakes and inform the credit bureau if certain information is inaccurate. After all, you want the lender to have reliable data when they run their checks.

Timely payments are a crucial factor when it comes to mortgage approval, and there are several approaches you could use to avoid being late on payments. If you have a hard time to keep up with your financial obligations, you could, for example, set up automatic payment for your bills whereby the payments due would be automatically withdrawn from your account and you wouldn’t have to worry about it. Still, bear in mind that automated payment for your credit card debt would not have the same effect. It’s efficient for the minimum payment, but your goal is to pay more than the minimum to reduce your debt at a faster pace and secure lower interest rates.  

Reducing the debt you owe will lower your credit utilization ratio which will make you look good at the lender’s office. Credit utilization refers to the amount of your credit limit and how much of it you spent. It’s recommended not to go above 35% of your credit limit. This means if your limit stands at $2,000, you should not exceed more than $700 of that amount. This will show the lender that you are a reasonable spender and that they can count on you to repay your mortgage. 

Reducing credit card debt requires discipline and effort, but it’s better to start sooner than later. The first step is to check all your accounts and see how much debt you have collected on each and how high the interest rates are. You will have to create a repayment plan, and the best is to start with repaying the one where the interest is the highest. Be consistent and don’t be late on your payments. You may set up a monthly reminder or ask your bank if they have a system to remind clients when payments are due. 
Maybe you will be tempted to get a new credit card to lower your utilization ratio, but you won’t be doing yourself a favor. In the long run, you will only accumulate more debt.

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