When preparing your credit for a home loan, there are some clear "Dos" and "Don'ts"… Unfortunately, there's also some not-so-totally clear advice — which, if followed, might accidentally lead you down the wrong path.

Three common credit mistakes that you might be making

 1. Paying for everything in cash

You've probably heard that credit is dangerous at one point or another. Some people will even go as far as to say that you should NEVER open up a credit card or get a loan. But that advice is entirely unhelpful. Because If you ever want to apply for a home loan, mortgage lenders will want to see a proven track record of responsible credit use. And someone with a non-existent credit profile, well, that doesn't give lenders a lot of confidence. 

 2. Closing old accounts

If you just dug yourself out of a deep debt pit…congratulations! You're a legend — and while it may seem smart to close out that old account so you're not tempted to rack up the same debt again. That's actually a bad idea. 

There are two reasons why:

• • First, the available credit on that account helps balance out your credit utilization, which is 30% of your credit score. 
  • Second, keeping older accounts open adds longevity to your credit history, which makes up 15% of your score.

 3. Opening new credit

This one's interesting because a new account could add more "unused credit" to your score, right? Yes, it can, but there are some negative factors to keep in mind. Opening that new account will shorten the average longevity of your account, it may increase your credit utilization and you'll get hit with a new hard inquiry that will stick around for years to come.

The bottom line

Credit scores are finicky things. That's why lots of people struggle to maintain a great score. But the more you know, the better your chances are of reaching a stellar score that unlocks your homebuying dreams!