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New credit report rules for home buyers: Why many might not qualify for a mortgage

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HOUSTON – One of the biggest changes to your credit report in years will take effect Saturday, changing the way in which lenders look at your credit to determine if you qualify for a home mortgage or refinance.

Currently, when someone applies for a mortgage, lenders look at credit as sort of a snapshot in time. They see how much you owe on credit cards vs. how much credit you have available to you.

Experts advise making no big purchases before closing on a new home because if that is the snapshot that the lender sees, the borrower will appear risky. Beginning Saturday, lenders will see how you've paid your bills over 30 months.

Lenders will consider not just whether you pay every month, but what you pay toward your credit cards. If you pay your bills in full every month, you are considered lower risk and you might qualify for a better interest rate. If you pay only the minimum amount due each month, you are higher risk. The bigger picture is called trended credit data. It will give lenders a fuller picture of a borrower's credit worthiness.

If you have already applied for a mortgage and it is in the approval process, your credit worthiness will be judged the old way, as a snapshot. Paying credit cards off on time and paying more than the minimum will help your score more under the new system.