Changing your living situation can be stressful enough without adding credit worries to the picture. The process of relocation can be fraught with many degrees of anxiety and disruptive commotion, and the chaos could be compounded if you’re not sure how your credit picture might influence your move. Your mortgage lender will likely look at your credit if you’re thinking about home ownership, and many landlords will want to see your credit report if you’re planning to rent. Lending institutions and landlords see your credit history as an indicator of whether or not you’ll be a responsible borrower or tenant who can keep their financial commitments in the future. It’s an important factor considered in their decisions. With summer as one of the busiest times of the year for real estate transactions, the time to get in touch with your credit is right now.
Luckily, you don’t have to be in the dark about your credit status – it’s something you should be knowledgeable about even before you commit to moving in the first place. You can do a few things to ensure your credit is “move-ready” before you begin the process of looking for the next place you’ll hang your hat.
Check your credit report as you begin your search process, long before a potential landlord or lender does. Check all the information on the report to make sure what’s being reported accurately reflects only your activity, with no surprises to address. This proactive step can help avoid the anxiety of not knowing where you stand, and it gives you an opportunity to address any suspicious activity that you didn’t authorize.
Don’t open any new accounts just yet. Buying furniture is usually one of the first things someone thinks of when facing a move. Furniture can be expensive, and store financing might seem like an attractive option. But taking this route can hurt your chances of getting approved for a lease or mortgage because credit inquiries, new credit, and a high credit utilization ratio – the amount of credit available to you versus how much of it you’ve used – can negatively impact your scores. Instead of purchasing furniture before you move, consider keeping your housing as the top priority and letting all your furnishings and home goods follow.
Avoid maxing out your credit cards. It’s important that you don’t push your credit card balances up to their limits when furnishing your new place or juggling other moving expenses. This also affects your credit utilization ratio. A general rule of thumb is to keep your ratio around 30 percent, or below. If your credit limits total $10,000, your outstanding balances should be in the neighborhood of $3,000, or below. Borrowing much more than that might signal to a conservative lender that you’re overspending. Pay down your balances as much as possible before applying for a lease or mortgage. And consider waiting until after you move to use your cards again, if you can pay moving expenses some other way.
Explore keeping your older credit accounts open. You might think that closing some accounts would improve your credit scores, but it could have the opposite effect. Your scores are partially affected by the length of your credit history. The longer you’ve had credit, the more favorable it can be to your scores, so closing an aged account can have a negative impact.
If this year is the year you’re thinking you’ll relocate, make sure you build credit into your advance game plan. Save yourself the anxiety and avoid last-minute surprises. Get your whole credit picture now, so you can be wise with all your credit information and make the best plan for your next step.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.