Preparing Your Credit Before a Mortgage Application
Mortgage underwriting uses older scoring models and the middle of three scores. What to fix, in what order, and what to stop doing.
Mortgage lending treats credit differently from other consumer lending, in ways that change what is worth doing in the months beforehand.
The score they use is not the one in your app
Most mortgage lenders pull older FICO versions from all three bureaus — models that predate the newer versions your banking app displays. Those older models:
- Do not ignore paid collections the way newer models do
- Do not consider rental trade lines
- Weigh medical collections the same as other collections
So the score you have been watching may be several points, sometimes many points, above the score the lender sees. This is normal and not a mistake by anyone.
The middle score, and the lower borrower
With three scores pulled, lenders generally use the middle one. Not the average, not the highest.
On a joint application, many programs use the lower of the two borrowers' middle scores. Which means the borrower with weaker credit determines pricing for both — worth knowing early, because it sometimes changes who should be on the loan.
Timeline
Twelve months out: stop opening new accounts unless there is a specific reason. Pull all three reports and start on any errors, because disputes take 30 days and follow-ups take longer.
Six months out: errors should be resolved or well underway. Keep utilization low every month, not just once. Do not close anything.
Three months out: no new credit at all. Utilization low and stable. Balances paid before statement dates.
During the process: nothing. No new cards, no car loan, no financing a sofa, no co-signing. Lenders commonly re-pull credit shortly before closing, and a new account discovered at that point can delay or derail the closing.
What to prioritize
- Errors, first. They take the longest and are the only thing with a genuine deadline attached.
- Utilization. Fastest lever. Aim well below 30% on each card and overall, reported — not just paid.
- Outstanding collections and charge-offs. Many programs require these resolved before closing regardless of score. Find out what your program requires before paying anything, because paying a collection does not remove it under the models being used.
- Do not close old accounts. Age and available limit both matter.
- Do not pay off an installment loan solely to improve the score — it usually does not, and cash reserves matter more to underwriting.
Debt-to-income is the other half
Score is not the whole picture. Debt-to-income ratio — your monthly debt payments against gross monthly income — is often the binding constraint, and a high score does not rescue a high DTI.
Paying down a car loan reduces DTI. Paying down a credit card reduces both DTI and utilization, which is why cards are usually the better target.
Rate shopping
Do all your mortgage applications inside a short window, commonly 14 to 45 days depending on the model. Multiple mortgage inquiries in that window are treated as one.