Mortgage and Lending with None currently nmls# 509659

I recently had a client who was oh so close to qualifying for a Rural Development Loan. She just needed one more month of paying her bills on time to get her over that magic 640 number. Both brokers, the seller held the contract up a month just to let this happen. When the month passed and we pulled her credit again it had gone down 26 points. The reason was really simple; she applied for two credit cards and direct TV for the new home. Of course the deal never closed.

Conversely last Monday a client came to see me, with her own tri merge credit report with a mid score of 776. She was a fantastic borrower and well qualified in every aspect. When I ran her credit the mid score was 710, the score went down 66 points in two weeks. The borrower had made all of her payments on time and had not taken on any debt. However she had closed out two old credit cards which drastically reduced the length of time she had credit. 15% percent of the calculation in credit scoring is length of time of credit. This increased her interest rate under risk based pricing ¼%.

I tell every borrower I meet do not touch or do anything with their credit until after closing. Anything they do (with their debt) can only hurt, when they act on their own. It is a real good idea to constantly re enforce this with your clients. It will save them money and possibly your commission check.

Comments (5)

Christa Borellini
Prudential California - San Diego, CA

Wow this is good info.  I didn't know that closing out your credit cards could have this affect.  Thanks and I'll re-blog this.  Good info.

Jan 13, 2011 06:21 AM
Wendy Betts
South Delta & S. Surrey Realtor

Great Info, Robert! Credit is such a sensitive issue - and unless the client knows the ropes about how every little movement on their score can make or break their dream, we're all hooped!  I didn't know that closing an account was also something that could adversely affect the scores!  Cheers - Wendy Betts - Vancouver BC

Jan 13, 2011 06:28 AM
Doug Anderson
Tucker Associates Real Estate Services - Danville, CA
Bay Area Real Estate Views

Robert - This is fantastic information to pass along and even while it is the usual job of the loan officer to deal with the financing component I suggest Realtors consider ways to remind the client of the stressed mortgage markets and the effect sudden decisions may have.

Jan 19, 2011 04:39 PM
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247


It is important that we know this information in order to help our clients from shooting themselves in the foot.

Jan 19, 2011 06:14 PM
Dan Edward Phillips
Dan Edward Phillips - Eureka, CA
Realtor and Broker/Owner

Hi Robert, this issue will continue to be a problem, education is the answer.

Jan 19, 2011 09:12 PM