How to vacuum your credit report before applying for a big loan?

Credit report influences your financial life.  When you plan to apply for a mortgage or any other big loan, you should work on your report months in advance to make it more appealing.  Here are some specific tips to vacuum your report.

  1. Get a free copy of your report sufficiently in advance – If you plan to buy a house, you should get your copy of credit report a few months before applying for mortgage.  On its scrutiny, you may be able to improve your credit score before the application.
  2. Manager credit cards – You should try to keep the balances on your credit card on the lower side.  This will increase your credit utilization ratio and credit score.
  3. Look at your bills – You should ensure that all your pending bills are paid on time.  If you’re paying them regularly, they are not reflected on your report.  However if they are overdue, such incidences will be promptly reported to your credit bureau!
  4. Avoid making any big purchase – Strictly avoid making big purchases like a new car or any other big ticket item before you apply for a mortgage.  That is the biggest mistake people make.  These transactions will lower the amount of mortgage for which you would qualify and sometimes it may even result in denial of loan application.  People are usually unable to understand the importance of this precaution.  If you have an amount of $50 in excess debt, it may reduce your mortgage amount by $5,000.
  5. Keep ready some documents showing non-traditional credit history – You can keep copies of your monthly rent payment statements, utility bills and telephone bills, payment of insurance premiums and payments to cable company ready for showing to the lender.  The regularity in payment of all these bills will add to your credit history.
  6. Try to remove the errors on your report – If your report is showing some unknown transactions, it may be a case of identity theft or a creditor might have mixed up data for other person.  In any case, you can take immediate steps to remove it from your report.

Correcting even minor mistakes on your credit report takes a long time.  You should be well prepared before you approach to any lender as a small mistake on your report may cost you thousands in the long run.

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