1. Check credit score and reports
The first step in preparing a client’s credit for a mortgage is helping them understand where they stand. Clients can access their credit score for free from major credit bureaus or through financial institutions. If their score is above 700, they may already qualify for favorable rates with little adjustment.
If the score is low enough to risk denial or trigger high rates, it’s often better to delay the application until improvements can be made. After clients get their credit report, encourage them to review it for errors or unfamiliar items. If they find any, they should dispute these with the credit bureau or contact the reporting lender. Correcting these issues is one of the fastest ways to boost a score.
2. Pay down debt
Paying down existing debt, especially credit card balances, is one of the most effective ways to prepare for a mortgage. This not only helps improve credit scores but also lowers your clients’ debt-to-Income (DTI) ratio, which banks and mortgage lenders review closely.
Credit utilization, the amount of credit used compared to the limit, is updated monthly and plays a major role in scoring. A good rule of thumb is to keep utilization under 30 percent. If your clients have high revolving balances, they might see improvements quickly once those debts are reduced.
3. Give it time
Some credit issues require time to improve such as: