Credit Moves Before and During the Mortgage Process: What to Consider Before You Apply

Usually Sensible vs. Ask Your Lender First

These are general habits, not rules for every borrower. Your lender and loan program decide what matters for your loan.

Before You Apply: Review Your Credit First

Before you change anything, look at what is actually being reported. Check each of your credit reports for accounts you do not recognize, balances or dates that look wrong, late payments you believe are reported in error, and accounts listed as open or closed incorrectly.

Knowing what is on your reports helps you have a clearer conversation with a lender. Use the Homebuyer Credit Readiness Checklist to organize your review, see What Mortgage Lenders Review for the bigger picture, and visit the Credit Reports hub to learn how reports work.

Keep Payments Current

Payment history is one of the main things scoring models and lenders look at. A new late payment can show up on your reports and may raise questions during the mortgage process, especially if it is recent.

A single late payment does not automatically mean a mortgage will be denied — lenders look at the whole file — but avoiding new late payments is one of the simplest ways to keep your credit picture stable. Autopay for at least the minimum payment, calendar reminders or due-date alerts can help if they fit how you manage your money.

Learn more: Payment History: Why It Matters Most

Review Credit Card Balances and Utilization

Credit utilization compares the balances reported on your revolving accounts with their credit limits. Scoring models generally look at both your overall utilization and the utilization on individual cards.

The balance a card issuer reports is often the balance on your statement, not necessarily what you owe today. That means a payment you make may not appear on your reports until the issuer’s next reporting date. Reporting dates vary by issuer.

There is no single “ideal” percentage that applies to everyone, and lowering a balance does not guarantee a particular score change. Understanding how your balances are reported can help you decide what to discuss with your lender.

Learn more: How Credit Utilization Works

Should You Pay Down Credit Cards Before Applying?

Paying down revolving balances can lower reported utilization and your monthly payments, but whether it makes sense depends on your situation. Things to weigh include:

• Your current balances and how they are being reported.
• Your monthly obligations, which lenders consider alongside your income.
• Your available cash. Lenders may also review the funds you will need for a down payment, closing costs and any required reserves.
• Your lender’s guidance on whether paying down a balance is useful for your file.
• Timing. If you are already in underwriting, large money movements may need to be documented.

Do not drain the savings you need for a down payment, closing costs or reserves just to reduce debt. Talk with your lender before moving large amounts of money. This page is general education, not individualized financial advice.

Should You Open a New Credit Account?

Applying for a new card or loan usually creates a hard inquiry. If it is approved, it adds a new account — and possibly a new monthly payment — to the information a lender reviews. A lender may also ask about recent inquiries or new accounts.

Opening a card does not always hurt a score, and the effect varies by person. But during an active mortgage process, the CFPB suggests avoiding other credit applications. As a general rule, discuss any new credit with your lender before you apply for it.

Should You Close a Credit Card Before a Mortgage?

Closing a card is not automatically good or bad, but it can change things a lender or scoring model looks at:

• Your total available credit goes down, which can change your utilization.
• The closed account’s history generally remains on your report for a period of time.
• Lenders may view open and closed accounts differently depending on the situation.

There are sometimes good reasons to close an account, such as an annual fee or a security concern. If you are preparing for a mortgage or already in process, ask your lender before you close a card.

Rate Shopping and Mortgage Inquiries

Comparing offers from several mortgage lenders is normal. According to the CFPB, multiple credit checks from mortgage lenders within a 45-day window are recorded on your credit report as a single inquiry.

How scoring models handle rate shopping varies. FICO says newer versions of its score treat mortgage rate-shopping inquiries within a 45-day span as one, older versions use a 14-day span, and its scores ignore rate-shopping inquiries less than 30 days old. Lenders do not all use the same score version, and there is no fixed number of points an inquiry costs.

Rate shopping for a mortgage is different from applying for an unrelated credit card or loan during the same period. Those other applications are generally counted separately.

Learn more: Hard Inquiries and Mortgage Rate Shopping

Large Purchases and New Debt

Be cautious about financing a vehicle, financing furniture or appliances, taking out a personal loan or opening new revolving debt while your mortgage is in process. New debt can:

• Add a monthly obligation the lender must consider
• Show up on an updated credit report or another check before closing
• Require the lender to update your application and re-review it

Fannie Mae, for example, notes that when a lender learns of new debt during origination, it must recalculate the borrower’s debt-to-income ratio and resubmit the loan to its automated underwriting system. That does not mean a new purchase automatically causes a denial — but it can change what is being reviewed. Ask your lender before you finance anything.

Do Not Miss Payments While You’re Preparing

The weeks before closing can be busy. Keep paying every account on time, including cards you rarely use, student loans, auto loans and rent. If something unexpected makes a payment difficult, contact the creditor and tell your lender rather than letting a payment slip.

What About Collections or Charge-Offs?

Collections and charge-offs are not all treated the same way. How they are reviewed can depend on the loan program, the balance, whether they are paid, and whether they are reported accurately. Paying or settling an account does not automatically remove it, so ask your lender before you act.

Learn more: Negative Items Before a Mortgage

What About Credit Report Errors?

If you find information you believe is inaccurate or incomplete, you have the right to dispute it under the Fair Credit Reporting Act. In general:

1. Review for accuracy. Identify exactly what is wrong — the account, the balance, a date or the status.
2. Document it. Gather statements, letters or records that support your position.
3. Use your dispute rights. Dispute with the credit bureau and, where appropriate, the company that reported the information.
4. Ask about timing. If you are already in the mortgage process, ask your lender before you start a dispute.

If a correction is verified while your loan is in process, your lender may decide whether a rapid rescore request is appropriate. A rapid rescore is a lender-initiated update of verified information — it does not replace the dispute process and cannot be ordered by a consumer.

Learn more: Credit Report Review Checklist

Active Disputes During a Mortgage Application

Some mortgage workflows treat disputed accounts differently. For example, Fannie Mae’s automated underwriting first assesses a loan using all accounts, including disputed ones. In some cases the lender must then investigate the disputed account and document the result. Other programs and lenders have their own procedures.

Because the effect depends on the program and the lender, ask your lender before you start, remove or change an active dispute during the mortgage process.

During Underwriting: Avoid Surprise Credit Changes

Your credit and liabilities may be looked at again before closing. Depending on the lender, the program and the process, a lender may review recent inquiries for possible new debt, check for liabilities you did not list, or obtain updated information if your credit report expires before closing.

Not every lender re-checks credit the same way or the same number of times. The safest approach is to assume that new credit activity may be seen, keep your credit picture steady, and tell your lender about any change.

A Simple Scenario

• Financing a vehicleAdds a new loan and monthly payment the lender may need to review before closing.
• Furniture accountCreates an inquiry and possibly a new account and payment while the loan is in process.
• Paying down a cardMay lower a balance, but uses cash the lender may also be counting for closing or reserves.

Each decision is worth discussing with the lender before acting. This example is hypothetical, does not predict a score, rate or approval, and is not a Maximum Score Builders client result.

Questions to Ask Your Lender Before Changing Your Credit

Your lender and loan program — not Maximum Score Builders — determine underwriting and eligibility.

What to Do Next

• Homebuyer Credit Readiness Checklist — organize your credit review before you apply.
• What Mortgage Lenders Review — see the credit information a lender may look at.
• Credit Scores Used for Mortgages — learn which score models lenders may use.
• Rapid Rescore Explained — understand what it is and who can request it.
• Negative Items Before a Mortgage — how collections, charge-offs and late payments may be reviewed.