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When you decide to take out a home equity loan, more goes into the decision than a quick look at the amount of equity you have built over time. Your lender will actually look at your credit standing and score first to determine your capacity and willingness to pay back the debt within the given time period. You must properly maintain your credit history to have a good chance at receiving an approval on your home equity application. Here are three credit mistakes you must avoid when applying for a home equity loan.

Missed Payments

Missed payments take an immediate toll on your credit score. When you miss a payment, your creditors send the information to the reporting bureau, so it can be used to calculate your new credit score. The 30, 60 and 90 day delinquencies quickly add up and continually drop your score. Paying off the accounts does not bring up your score to prior levels either, though it does prevent additional reports and further decreases. Maintain a timely payment history to fill your credit with paid on time reports to keep your score at a healthy level. When you fill out a home equity loan application, your lender will look at your current and past payment history when deciding to offer you the requested line of credit.

Open New Accounts

When you open new credit accounts, you dramatically decrease your overall credit age. If you have three accounts that are three years old, opening another will drop the combined age of your accounts by as much as 25%. With each subsequent account you open, your credit age drops even further. The credit age plays a vital role in telling lenders about your ability to responsibly handle financial matters. As your credit accounts grow older, your lenders are able to see that you keep your accounts in good standing over the years. When your credit age drops, your credit score will also take a dive, which can result in the denial of your home equity loan.

Collection Disputes

Since open collections can negatively impact your home equity loan decision, you must appropriately handle and close the account before filling out your loan application. You cannot just file a dispute, however, and explain the circumstances to your lender. The open dispute acts as a red flag to lenders and can result in the denial of your credit request. Instead, file the dispute at least thirty days before you plan to fill out your home equity loan application. If your dispute does not appropriately discharge your debt, you will need to pay it off to avoid having the outstanding amount impact your loan application.

Cleaning Up Your Credit

When you take the appropriate steps to clean up your credit before filing your loan application, you give yourself the best chance at receiving an approval from your lender. If you are unsure about your current credit status or the right steps to take when handling delinquent accounts, talk to your home equity lender to determine if your financial situation meet their stringent requirements.