Are You Ready For a Credit Check Storm? Learn How to Weather a Potential Blizzard by Learning The Do’s & Don’ts of Storm Prep
Author: Alexa Faithful [Loan Officer]
Read Time: 5-Minutes
Date: 11-27-2022
When buying your next home, changes to your credit [additional accounts, closing accounts, missed payments, fluctuating credit card balances] can be very similar to a tornado touching down. Disastrous to you and your home! If your credit score changes, that can affect your interest rate and even the loan approval itself. Therefore, there must be no significant changes to your credit and information provided during the financing process.
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The initial decision to purchase a home might be an easy one, but there are many things to consider. Your credit score and credit history are among the most significant factors that go into the home purchase process as it determines how much you qualify for and how high your interest rate will be. Much like a tornado, bad credit can be disastrous to you and your potential new home opportunities and leave you spinning. You also have to consider that any major changes on your end during this process (like increased debt or missed payments) could flatten your chances of owning a home.
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To increase your chances of getting a loan at a great rate, you will consider the following Alexa Faithful, Do's & Dont's.
DON'T:
Verify my mortgage eligibility (Nov 24th, 2024)- Charge any new items on your charge cards (higher balances will lower credit scores). You may use your credit cards in the process, but only if you routinely pay them off in full each month.
- Apply for any new charge cards or loans (new debt will decrease how much house you qualify for, and since your credit is monitored throughout the process, you'll have to explain any recent credit inquiries that pop up.)
- Buy or lease any new major purchases - mainly cars, furniture, appliances, etc.
- Co-sign for anyone's loans for any reason.
- Allow anyone to check your credit unless in the shopping process, and even then, know the consequences (each inquiry may lower your credit score).
- Change employment – While there are SOME scenarios in which a job change in process is permissible, it could also go the other way. Be sure to consult your Loan Officer before making any changes with your employer or job.
- Start any new remodeling jobs. (?)
- Miss any payments on existing credit cards, loans, or lines of credit.
- Apply for new credit. When you do this, the creditor is going to pull your credit. Every time your credit is pulled, your credit score gets lower. This includes co-signing for a loan too!
- Max out your credit cards. A good rule of thumb is to keep your balances to no more than 30% of the credit limit or less.
- Consolidate your debt – Unless instructed otherwise by your Loan Officer, leave your accounts as-is.
- Close credit card accounts – Closing out accounts often has an adverse effect on your scores.
- Pay off collections or "charge-offs" to pay off old accounts – while it seems counterintuitive, paying off collections can drop your score and might not be required to get your loan approved.
"Think of your credit score as your housing resume." Any red flags could affect you closing the deal, similar to discrepancies on your background check with trying to get a job."
Alexa Faithful | CMS Mortgage Loan Officer
Verify my mortgage eligibility (Nov 24th, 2024)
DO
- Stay current on your existing accounts. Just one 30-day notice for late payment could cost you your loan approval.
- Use your credit as you normally would. You'll raise a red flag if you change your patterns and end up lowering your credit score.
- Call your mortgage lender before you make ANY changes to your credit, bank accounts, or employment.
Keep these Do's and Dont's in mind, and you'll be better prepared to close on that dream home!
Verify my mortgage eligibility (Nov 24th, 2024)
Things to Remember.
- Your credit is monitored while you're in process with the Lender, so any new credit inquiries will need to be documented and verified to ensure no new debt has been established.
- If your credit score is less than the minimum score needed to qualify, ask your Loan Officer if they can run a "What If Simulator". This is a tool that most Lenders have access to that can analyze your accounts and make suggestions that will boost your score by 20-70 points or more.
- You don't need perfect credit to get approved for a home. Life happens, and sometimes setbacks are inevitable. But knowing how your credit scores work is the first step to getting on and staying on the right track. Make sure that you have a good explanation for all derogatory marks on your credit.
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If you'd like to learn more about what factors affect your credit score, contact Alexa Faithful today.
Related Topics
Verify my mortgage eligibility (Nov 24th, 2024)- What You Should Know Before Applying For A House Loan
- 4 Things Homebuyers Should Know Before Making an Offer
- House Loan Options: All You Need to Know
About CMS Mortgage
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CMS Mortgage prides itself in its Live, Love, Mortgage Motto! Our top priority is our investment in people and building relationships. By consistently meeting and exceeding our clients' needs, we strive to become the standard for excellence in the mortgage industry.
Placing Value, One Family at a Time.
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