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Approved for A Home Loan? What Not To Do With Your Credit

Mortgage and Lending with Amerifirst Financial Inc

You have been pre-qualified for a home loan and just signed the Purchase Agreement.  The Seller has accepted your offer and we are off to the races with our 30 day escrow.  Did your loan officer tell you there were a few do and don'ts for your credit during this critical period?  I sure hope they did.  Now in Arizona, and perhaps other states as well,  we have to do a soft pull on your credit prior to funding your loan.  Gone are the days when you bought appliances and furniture before closing!!!  That additional debt would have to be considered and your loan would be sent back to underwriting and possibly denied.

1.  Don't apply for new credit of any kind.  This includes those "you have been pre-approved" credit card invitations.  Every time that you have your credit pulled by a potential creditor or lender,k you lose points from your FICO score or credit score immediately.  Depending upon t your current profile, you could lose from one to twenty points for on hard inquiry!

2.  Don't max out or over charge on your credit card accounts.  This is the fastest way to bring your scores down.  Try to keep your credit card balances below 30% of their available limit at ALL time during the loan process.  Let me repeat that for anyone trying to increase their FICO scores, keep your credit card balances below 30% of their available limit at ALL times/.  If your credit limit is $1,000 and you can keep your balance at or below $300 you are helping to boost your score!  Do this with all your revolving credit accounts and you will be pleased with the result.

3.  Don't close credit card accounts.  If you close a credit card account you will lose available credit and it will appear to the FICO that your debt ratio has gone up.  Also, closing a card will affect other factors in the score, such as length of credit history.  If hou HAVE to close a credit card account, do it after we have closed your new home loan.

4.  Don't pay off collections or charge offs.  Unless you can negotiate a delete letter, paying collections will decrease the credit score immediately due to the date of last activity becoming recent.  If you want to pay off old accounts, do it through escrow - at closing.

5.  Don't dispute anything on your credit report.  When you send a letter of dispute to the credit reporting agencies, a note is put onto your credit report, and when the underwriter notices items in dispute, in many instances, they will not process the loan until the note is removed and new credit scores are pulled.  WHY?  Because in some instances, credit scoring software will not consider items in dispute in the credit score - giving false date to the lender.

More Credit "Don'ts" tommorrow.    

Robert Amato
Bob Amato of Empire Home Mortgage Inc - East Meadow, NY

All good information J Lauren. Let's hope that all Mortgage Pros tell their clients these tips.

Jul 12, 2011 03:02 PM
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

Lauren.....great info.  I preach on this all the time.  Love telling clients and borrowers to stay out of trouble!

Jul 12, 2011 03:06 PM
J. Lauren Parker
Amerifirst Financial Inc - Surprise, AZ

Thanks Larry and Bob for your comments.  It seems even more appropriate in todays lending climate.

Jul 13, 2011 10:02 AM