Credit scores can effect more than short-term borrowing. Whether you’re shopping for your first house or looking to move up to a bigger home, how you manage credit can have an impact on the amount you can borrow and the terms of the mortgage. Obviously, people who are responsible with their debt will have few difficulties obtaining a mortgage. Although those who have less than perfect credit may have more hoops to jump through, it is not impossible to be approved for a mortgage.

If you only have one negative report on an otherwise good credit history, simply contact the mortgage lender in writing to explain the circumstances. Many lenders will overlook an isolated incident, especially if it occurred some time ago. Lenders are most concerned about the two years prior to your application. According to guidelines established by the Federal National Mortgage Association (Fannie Mae), indicators of good credit do include some leeway for occasional late payments. Revolving credit like credit cards and installment credit like auto loans should show no late payments more than 60 days and less then tow payments 30 days late. Mortgage payments must never show late payments.

Other factors that are considered by lenders will be credit cards that are ‘maxed’ out and large lines of open credit. Both situations may indicate difficulties managing debt. Some lenders will also look at how many inquiries have been made into your credit report recently, showing a troublesome sign of large number of possible of credit applications. Applying for numerous lines of credit might indicate that you have been turned down by several other lenders or that you are in the process of accumulating new credit accounts which might leave you with too much credit available to be a good credit risk.

Fannie Mae suggests these factors may also make a difference in your mortgage:

• A large down payment
• An energy-efficient property such as up-to-date heating and power systems
• Previous large housing payments
• The likelihood of career advancement, strong education or job training
• A substantial net worth

Before applying for a mortgage be sure to thoroughly examine your credit report to optimize your borrowing ability. Insure that it’s accurate and dispute any errors so that your current credit situation is available to lenders.

Posted in Credit Tips

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