When you fill out a credit application for a personal loan or mortgage your lender will run a credit report. The credit report gives the underwriter information on your credit history and how well you manage your credit. This information is weighed heavily when determining if they should approve your loan. Each lender and each loan program has different guidelines they must follow. You should be careful not to do anything that would adversely affect your credit score while you are in the loan process. I know it is tempting…buy a new car…take a nice long family trip – DON’T DO IT.
If you are moving into a new home you are probably thinking of all the new appliances and furniture you will need and picking them up early may even save you a few dollars. It is really not the right time to go shopping with your credit cards during the loan process. You will want to remain in a stable position until the loan closes. Here is a list of do’s and don’t’s that you should follow once you decide to apply for a loan.
When you are ready to get preapproved, call Michelle Sturdevant at out Houston office 713 572-5308 to see one of our specialists. From application to close, our team can help you with the approval process every step of the way.
DON’T APPLY FOR ANY NEW CREDIT: We have all received them. Those interest free credit card offers that magically appear in our mailbox. Don’t respond. If you do, that company will pull a credit report and this will have an adverse effect on your credit score. Likewise, don’t establish new lines of credit for things like furniture, home improvement stores, department stores, etc.
DON’T PAY OFF COLLECTIONS OR CHARGE-OFFS: Once you have applied for a loan, don’t pay off collections unless the lender specifically requires this payoff as part of the loan approval. Generally, paying off old collection accounts causes a drop in the credit score. If your lender wants these accounts cleared off, they will have it done prior to closing your loan.
DON’T CLOSE CREDIT CARD ACCOUNTS: I know its tempting. You have a account that has a zero balance and you want to close the account. If you close a credit card account, it can affect your ratio of debt to available credit which may have a impact to your score of up to 30%. Have patience and close the account after your loan has closed.
DON’T MAX OUT EXISTING CREDIT CARDS: Charging up your credit cards is the quickest ways to lower your credit score. Once you have applied for a loan, try to keep your credit cards below 30% of the available credit limit.
DON’T CONSOLIDATE DEBT: Here is another example of a good idea being very wrong. Consolidating your debt will change your ratio of debt to available credit.
DON’T CHANGE EMPLOYERS, MOVE OR CHANGE YOUR ADDRESS: Most lender will pull a updated credit report right before closing your loan. Listed on the credit report will be your employer information as well as your addresses. Any change in employment will affect your entire loan. Changing your address will put up a red flag to the underwriter. Don’t even change your mailing address to a new PO box as this will also be questioned.
DON’T RAISE RED FLAGS TO THE UNDERWRITER: Don’t co-sign on a loan for another person. When you co-sign on a loan for another person, that loan is reflected on your credit report as well. If the other person does not make a payment or makes a late payment, your credit report will also be affected. The less activity that occurs during the loan process the better.
DO WATCH YOUR CREDIT: There are many of these program online but you could also check your local bank, credit union or credit card company. The may be able to provide you with a free credit watch program that can alert you to any changes in your credit report. Knowing any changes in your credit report can help you to be able to intervene before the underwriter receives the information.
DO STAY CURRENT ON EXISTING ACCOUNTS: We all know that making your payments on time is one of the most important things to do. Late payments on your existing mortgage, loans, credit cards or anything else that can be reported to a credit reporting agency will cost you. Once 30-day late payment can cost anywhere from 30-75 points on your credit report.
DO CONTINUE TO USE YOUR CREDIT AS YOU NORMALLY WOULD: If it appears that you are diverting from your normal spending patterns this could put up a red flag within the scoring system and could cause your score to go down. Make any changes in your spending patterns after you loan closes.
DO KEEP IN TOUCH WITH YOUR LOAN CONSULTANT: If you receive anything from your creditors that could potentially affect your credit score, always call your loan consultant to get their advise on how you shouldn’t handle the information. It is always better to ask your consultant then to find out later that your decision affected your credit and the outcome of the loan.
The key to maintaining a good credit report and a quick and easy loan process is to follow the do’s and don’ts above. Keep everything in your financial life level. Make your payments on time and keep track of how many people access your credit report. Know what your credit report says about you BEFORE you apply for a loan and if the time allows, correct those items that could affect the outcome of your loan.
Call Michelle at 713 572-5308 to see one of our specialists. From application to close, our team can help you with the approval process every step of the way.
Let’s get started today…713 572-5308, email email@example.com
Categories: Real Estate Advice for Buyers