Improving Your Credit Score: Don’t Open New Credit Accounts Before Applying for a Loan

Introduction

If you are like many men and women today, you are looking for ways in which you can improve your credit score and your credit history -- you are looking for ways in which you can improve you credit report. You may desire to do this in advance of seeking a loan. Through this article, you are provided some insights into what you can do to improve your credit score and your credit history prior to applying for a loan.

Preparing to Apply for a Loan: What You Should/Should Not Do

If you intend to be applying for a new loan in the near future you will need to make sure and not open new credit accounts before you apply for the new loan. Many people receive credit card offers in the mail that are enticing with zero percent rates and low transfer rates. These offers can be beneficial to some but if you are intending to take out a new loan for a mortgage or an automobile loan in the near future, you may want to wait until you have closed your loan to take advantage of them.

A Lender and Your Credit Score

Lenders analyze your credit scores and then determine whether or not they will approve your home mortgage or your car loan. If you have recently taken out new credit accounts prior to requesting this new loan it just may disqualify you from getting the loan because your credit score was decreased enough to not qualify.

How Risky are You?

Since the lender is trying to determine how much of a risk you are and how likely you are to repay the money they loan you, the higher the credit score that you have, the less risk they feel they will be absorbing.

How a Credit Report and a Credit Score will be Used by a Lender

Credit reports are scored using software that looks at five different areas. These areas are your payment history, the amounts that you owe, the length of your credit history; the types of credit used and last but definitely not least are your new credit accounts.

Lending and Borrowing Statistics that You Need to Know

Statistically, you are a riskier borrower when you open new accounts. When you apply for a new line of credit or take out a new line of credit, your credit scores will drop. Once the credit card has been paid for a few months then the credit score will go back up but if you are wanting your credit score to be as high as possible to qualify for the loan and also get the best rate available, then it would be prudent to put off getting any new credit cards before you close on a major loan like a mortgage or automobile loan.