Mortgage 101
March 10, 2022

5 Ways to Protect Your Credit When Buying a Home

March is Credit Education Month. There’s no better time to educate yourself on the importance of your credit score, especially when you’re amid the homebuying process. Below, we’ll look at five ways you can protect your credit.

Pull Your Report At Least Once a Year

Protecting your credit starts with knowing where your credit stands. You can also check your credit report for free every twelve months. There are several factors that affect your credit score, such as credit utilization, payment history, credit mix, and credit history age. When lenders pull your report, they’re looking for answers to questions such as, “does this person pay their bills on time?”

Be sure all the information contained in your report makes sense, including names, addresses, social security number, account names/numbers, and loans. If you find inaccurate information on any credit report, it’s important that you dispute the information as soon as possible to have it corrected.

Monitor Your Credit with Alerts

While your bank and credit card providers will watch for fraudulent activity, this isn’t a substitution for credit monitoring. There are credit monitoring companies that typically provide updated credit reports every thirty days, ensuring you stay on top of any unfamiliar activity. They can often deliver real-time alerts if your account receives new inquiries, an account is opened, there are changes to your personal information, or any other suspicious activity is recorded.

Use a Credit Freeze Only When Necessary

Using a credit freeze prevents others from accessing your credit report, a necessary action if you’re dealing with identity theft or fraud. It’s better to halt all activity until the issue has been solved. It doesn’t cost anything to freeze your credit, however you’ll have to remember to unfreeze before you can open a new account or have your credit pulled.

Learn to Recognize Phishing

You’ve most likely encountered a phishing scam, even if you’re unfamiliar with the name. Has someone been trying to reach you about your car’s extended warranty? Alternatively, has someone called an older loved one and claimed they need financial assistance to get out of prison or the hospital? These type of phone calls are examples of phishing schemes. Others aren’t as easy to spot.

Never provide personal information to an outside party that contacted you. Banks, credit card companies, and the IRS will never ask you to verify information in an e-mail. If you receive a call requesting sensitive specifics, feel free to take down the details and call your institution back directly. It’s important to remember that the IRS and other government agencies typically send all their communications through the United States Postal Service.

Wait Before Applying for New Credit

Since a large portion of the mortgage application process involves determining your debt-to-income ratio (DTI), applying for a new line of credit can affect this ratio. It’s best to avoid large purchases or new credit applications until after your loan closes.

Buying a home is a major financial decision. Homestead Funding has what you need to ensure your homebuying process is as stress-free and smooth as possible. Although we’re not credit repair specialists, we can offer our borrowers credit and debt management assistance through a Fannie Mae approved platform. Contact us today to be put in touch with a Loan Originator who can help find solutions to your home financing needs.

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