<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=262189827814310&amp;ev=PageView&amp;noscript=1">

Amerifirst blog

Explore our blog for insights on buying, financing, remodeling, and taking care of your home.

Back to all posts

First Time Home Buyers and Credit: 6 Mistakes to Avoid


person drinking coffee looking at laptopWondering what you need to do if you're planning on buying your first home? It's simple. Have the best credit score possible. With a good credit score, you'll almost always qualify for the best interest rates and terms on your home loan.


And the less money you pay in interest, the faster you'll pay off the mortgage. 


Your FICO Score

Once you apply for a home loan, your lender will take a look at your FICO® score - a three-digit number ranging from 300 to 850. These scores are largely based on your credit reports (statements generated by the consumer credit reporting bureaus that detail your credit activity and current credit situation) and can help creditors assess how likely you are to repay debt.


6 Actions to Avoid

If you're planning on buying your first home in the next year or so, we've identified 6 things you should avoid doing to keep your credit score from dropping. These include:

  1. Maxing out credit cards. Maxing out credit cards is one of the quickest ways to drop your FICO score. You could drop 100 points easily by doing this. Try to keep your balances below 30% of the available credit (especially during the loan process). A helpful tip: if you're considering paying down the balances, do it over all of your cards, not just one.
  2. Paying off old collections. Paying off a collection will drop your score right away because of the "date of last activity" category. If you're going to pay off old debt, wait until after closing.
  3. Consolidating credit into 1 or 2 cards. Consolidating may seem like a smart move, but it actually drops your score because on paper, it looks like you've maxed out the card you're moving the debt onto. Wait until after closing your mortgage.
  4. Closing credit card accounts. Closing a credit card will actually appear as though your debt ratio has gone up in the eyes of FICO. It also affects things like length of credit history (a longer history is a good thing with credit). If you're set on closing a credit card account, wait until after closing or make sure it's the most recently opened account.
  5. Falling behind on existing accounts. A simple 30-day late payment on a mortgages or car payments can drop your FICO score anywhere from 30-80 points. Make sure you stay current on all of your accounts.
  6. Doing anything that will raise the red flag. Other activities that raise the red flag include adding new accounts, changing your name or address with the credit bureaus or co-signing on another loan. It's better to have little activity on your credit report during the mortgage loan process.

One piece of advice that's important to remember: Don't tackle the credit issue completely on your own. Sometimes the task of improving credit can seem overwhelming. You may want to give up. But don't. Feel free to reach out to one of our friendly mortgage advisors at a branch near you. They are always happy to answer your questions and provide some valuable and very doable tips to help you improve your credit standing.


If you're wondering if your credit is good enough to secure a home mortgage, our "Understanding your Credit Guide" can answer many of your questions. It's free!


Provided for general information and not intended as credit counseling, financial or legal advice. Contact  your financial representative or tax preparer for more information. Not all borrowers will qualify; contact us for more information on fees and terms.


Related Posts

Tips to Save on Your Homeowner's Insurance

Home insurance premiums can make up a big chunk of the annual expenses of a family.  Insurance rates change every year, and in many cases the premiums go up. We all know that there are several variables that determine which banks will lend us money, how much insurance companies will charge us for coverage, and what qualifies a buyer. There are four main variables that may affect your home insurance rate:

Home Maintenance Tips for Winter

Sure, spring cleaning sounds great.  However, in reality, tackling a long home maintenance checklist all at once can be overwhelming. Rather than letting it all add up, what if you tackled home maintenance a little each season? Here are some ideas for taking care of your home during the winter months.

Tips for Paying Off Your Mortgage Faster

There are several ways to pay off your mortgage faster and save on interest payments. Even better, not all methods require spending a lot of extra money! Take a look at the list below: Make extra principal payments.  You can pay extra money toward your mortgage balance each month or make a larger, lump sum payment on your principal each year. This reduces the amount due on the mortgage as well as reducing the amount of interest that will accrue. Extra money can also be added to the principal payment from bonuses, gifts, savings and extra earnings. Just remember to make a note on the check for the money to go towards the principal! Make one extra mortgage payment per year. One of the easiest ways to make an extra payment each year is to pay half your mortgage payment every other week instead of paying the full amount once a month, otherwise known as “bi-weekly payments.” With these payments, an extra payment is made so that the total number of payments that one makes adds up to 13 payments in a year rather than the 12 that would have been made with monthly payments. This adds up to significant interest savings over the duration of a mortgage. You also want to make sure that if your lender accepts this kind of payment they will not charge you a prepayment penalty. Also verify that the bi-weekly payments are being applied to the principal amount and not the interest. Otherwise, you won't notice the savings. Reduce your balance with a lump-sum payment. Have you inherited money, earned a bonus or commission, or sold a large item? You could apply that amount to your mortgage’s principal balance. Another option is any time you have a month where you have that third paycheck, apply that to the principal on your mortgage. This will happen twice a year, adding an extra principal payment to your mortgage loan. While paying down a large debt is nice, it's not a requirement. Consider making sure you have enough to work toward other financial goals, such as an emergency fund, before paying more on your mortgage. However, there are many options you can explore that best fit your budget. You can learn more about buying your first home with our Get Mortgage Ready Guide below.


Call us



Get started

Apply online today