I recently sat through a continuing education course offered here in Portsmouth New Hampshire, on credit scoring and the loan process.  Not being a loan officer, I knew I didn't know it all, but I did find that there were a few things that were a bit enlightening to me.

I have the info below set up in a flyer format that I give to buyers I work with, and I'm also going to make this part of one of my websites somehow, too.  Since there were a few things I learned during this course, I thought I'd share this list here.

      1) DON'T APPLY FOR NEW CREDIT OF ANY KIND.  This includes all those "You have been pre-approved"  things you get in the mail.

      2) DON'T PAY OFF COLLECTIONS OR CHARGE OFFS.  Don't do either of these during the loan process.  If  you do this during the process, you'll decrease your score right away due to the date of last activity becoming recent.

      3) DON'T CLOSE CREDIT CARD ACCOUNTS.  Closing a credit card account will cause your debt ratio to go up on your FICO score.  Closing an account will also affect other things in your score such as length of credit history, etc.  If you have to, or want to, close any accounts, do it AFTER the closing.

      4) DON'T MAX OUT OR OVER-CHARGE YOUR CREDIT CARD ACCOUNTS.  This is the fastest way to get your score lowered by 50-100 points right away!  Try to keep your balances under 30% of your available credit, especially during the loan process.

      5) DON'T CONSOLIDATE DEBT ONTO 1 OR 2 CREDIT CARDS.  This seems like a great thing to do, but when you do this, it will appear as if you're maxed out on that card, and that will affect your score as mentioned in #4 above.

      6) DON'T DO ANYTHING THAT WILL RAISE A RED FLAG BY THE SCORING SYSTEM.  This includes adding any new accounts, co-signing any loans, changing your name or address, etc.  The less activity on your reports during the loan process, the better.

      7) DO JOIN A CREDIT WATCH PROGRAM.  A credit watch program will allow you to check your reports weekly or daily, or however often you choose to check them.  This way, you'll know right away if something shows up on your report during the process and you may be able to take care of it before the closing.
             Just a note: When you pull your own credit reports, you don't get dinged for a hard inquiry.

      8) DO STAY CURRENT ON EXISTING ACCOUNTS.  Just like your mortgage and car payments, keep on top of and current on all debt.

      9) DO CONTINUE TO USE YOUR CREDIT AS YOUR NORMALLY WOULD.  If it looks like you're changing your patterns, it will raise a red flag on your FICO score, and it could cause it to go down.  Remember, part of your score is your history and your behavior.

    10) DO CALL YOUR BROKER.  If you receive anything in the mail from a collection agancy or creditor during the loan process that you think may affect your score, call your loan officer/broker.  They may be able to give you resources that can help stop any derogatory reporting to the bureaus.

One thing to always keep in mind is that the lender will pull your credit report again just before closing, and if your scores have dropped, you may no longer qualify for the rate and/or the program your mortgage has been written for.  All lenders qualify buyers based on your credit score, and this is what determines which rate you can get and what programs you can qualify for.

These tips are provided to help avoid credit mistakes that some borrowers tend to make during the loan and homebuying process.

        

             





                                  
  Ann Cummings, New Hampshire & Maine Broker
  RE/MAX Coast to Coast
  Portsmouth NH
  ann@anncummings.com
  888-349-5678 x 3839
  Servicing the Coastal Areas of NH & Southern Maine