The most common issue is not correcting items on your credit report. A large majority of credit reports have errors but not all of them are critical. Since it takes time to remove them, it is a good practice to review your free credit reports from Experian, TransUnion, and Equifax once a year at www.AnnualCreditReport.com.
Another problem is making late payments. One 30-day late payment could be enough to cause a borrower to pay a higher interest rate or even be denied a loan.
Maxing out credit cards is another big problem. Ideally, a person wants to have an outstanding balance of no more than 30% of their available credit. As the percentage of available credit decreases, the credit score will go down.
Bad credit can not only keep you from getting the loan you want, it can raise your rates on the insurance you buy. In a study released by the Consumer Federation of America, people with good credit paid less than people with average and poor credit. Their results indicate that some customers with poor credit scores were charged about twice as much as those with excellent scores.
A prudent idea if you are going to be moving to a different home is to get pre-approved with a trusted mortgage professional before you sell your current home. Occasionally, sellers find out after they’ve sold their home that they can’t qualify for another mortgage.