Credit Tips to Score a Lower Mortgage In a mortgage lender's eyes, a good credit score translates into lower interest rates for home-shopping borrowers. The higher your score is, the less risk you are, and the more likely it is you will pay off your debt. For this reason, borrowers with lower scores usually end up paying higher interest rates on their loans.

Should I pay off all past due balances and charge-offs?

IT DEPENDS … This is usually a good idea, but you only need to worry about the past due balances and charge-offs that have occurred in the last two years. Items more than two years old have little effect on your current credit score. In fact, if you pay off delinquent items over two years old, it can actually bring your credit score down - something you don't want to do. Bringing that score up means you'll get a better interest rate on your loan.

Should I close existing credit card accounts that I don’t really use?

“NO.” Part of your credit score is based upon the length of your credit history and over-all available credit. Even if you don’t use old credit cards much, you will still benefit from the credit history they represent. Limit-to-balance plays a major role in determining your credit score.

Rather than trying to pay off all your credit cards, move part of the debt from one card to another to evenly distribute of debt. Try to keep the ratio of debt to credit limits at about 30% of the available credit or less. If your credit provider will increase your line of credit, the ratio of debt to available credit is automatically reduced. When you speak with your credit provider, ask them if they can raise your limit WITHOUT making a credit inquiry. Recent and frequent credit inquiries can hurt you and lower your score.

What about errors on my credit report?

 Paying off an old debt can hurt you if not handled properly. If you are in the midst of obtaining a mortgage, make sure and get the advice of your mortgage professional before starting this process. Any action you would take on an old account brings the last activity to a current status and that WILL drive your score DOWN.

If not in the midst of obtaining a mortgage and you are going to pay items on your credit report less than two years old, if possible, send in your payment and mark the back of the check with the following notation: "Accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit record." If necessary, the cancelled check might be used as proof that the item should be promptly removed from your credit report. For more information on more tips on how you can improve your credit score to get yourself “mortgage ready” visit my website.