I have consulted with many people that thought they had taken the right steps to improve their score prior to applying for mortgage, only to find out that they had accomplished the opposite. The following 5 ideas might sound like the right things to do, but will surely kill you credit score.

1. Paying off an old collection account

You might be thinking that lenders want old collections to be paid off, so you take care of it prior to applying for a mortgage. After all, payment history counts for 35% of the credit score. Let’s say the collection was over two years old. At this point it has less impact on your score. Should you pay it off, your score would drop, because now the negative event is recent. The scoring model is a mathematical formula that looks at the date of last activity, regardless what that activity is. Therefore any collection should be paid off at escrow, not before.

2. Closing credit card accounts

Has some one told you before to close unnecessary credit card accounts? Sounds reasonable, less available credit, should look good to lenders – so you think!

You go ahead and close three of your credit cards, and leave only two open. Maybe the remaining two cards are now maxed out. This move accomplished two things for you: First, you just raised you ratio of cumulative balance to cumulative limit. This will lower your score. 30% of your score is determined by how much you owe compared to how much your credit limit is. High balances predict higher likelihood of future credit problems.

Second, if you happened to close older cards, you also shortened your credit history, which is 15% of your score. (Example: You have had 1.card for 5 yrs & 2. card is brand new, your history is 5 years + 0 years, divided by the total number of cards, which is 2. Your history is 2.5 years.)

3. Transferring credit card balances

Another strategy used by many, is to send away for new credit card offers promising low introductory interest rates; we all receive these offers in the mail. In hopes of saving money, you transfer balances from older accounts to the new card.

From the credit scoring point of view, you just incurred another inquiry and shortened your cumulative credit history. Another hit to your rating.

4. Utilizing deals such as “Buy now, don’t make payments till June of 2 years from now”

This way you could buy all the furniture and electronics you want, right now. Instead of charging them to your Visa and having the extra monthly payment, you were smart enough to defer the liability for a while. Maybe you could even qualify for higher mortgage… Wrong!

Even though you are not required to make payments for the first 2 years, the debt shows on your credit report. If you buy as much as you are approved for, you will show maxed out for the entire 2 years!

The retailer is not going to wait that long to get their money, they sell the note to a finance company. Finance company backed credit always hurts your score, no matter how much you owe or how well you pay, because using a financing as such predicts higher possibility of default.

5. Shopping around for a mortgage

We have been told to shop around. Very well. Inquiries count for 10% of the score, and each occurrence cost you about 5 to 15 points, depending on your credit profile and what type of company inquires. The good news is that multiple inquiries made by mortgage companies are treated as one, if they incur within a 30-day period.

It is recommended that you check your report for inaccuracies prior to looking for financing. Make sure once you start looking for financing, should you compare different lenders, that you do it in the 30-day time frame.

My advice: Before taking action to clean your credit, consult with a knowledgeable mortgage professional.

My name is Heli Walker and I am an Arizona Mortgage Specialist. For more information on mortgages and credit, visit my web site http://www.azhomeloansolutions.com.