That Pesky Credit Report!
I've been a mortgage loan officer for 18 years. Through the years, I've looked at a lot of credit reports and heard a lot of excuses for collections and late pays! Here are some of the more common excuses I hear.
"That's why I have insurance!"
Medical collections. Used to be, we looked at these with a grain of salt. Someone has a few medical collections, oh well, how do they pay their "real bills"? That was before credit scoring in the mortgage industry. Lately, I've seen these types of collections torpedo a credit score. This past fall, I had a client want to refinance. His mortgage, car notes and credit cards all showed perfect payment histories. You might guess a score in the 700's or at least the high 600's. No, his middle score was 548! He had several collections, all of them medical. In fairness, his balances on his credit cards were high, but not enough to bring his score to a 548.
Even though you have insurance, you sign form after form saying that you are responsible for any/and all medical bills.
- Make sure you submit your bills to your insurance company on a timely basis.
- Follow up, to make sure the bills are paid.
- Read any correspondence from the insurance company and call them with questions.
- Read any correspondence from doctors, hospitals or other medical providers.
- Don't ignore past due bills! Call, call, call!
" I paid that account off! I don't owe them any more money!"
Yes, you paid them off but how did you pay them? Were you late most of the time? Did you let the bill slip into collection? Just because you don't owe money on an account doesn't mean that it won't hurt your credit rating and scores! We look at your credit history for the past 7 years (bankruptcy stays on for 10 years). How you repay your debts is a huge part of your credit score and the mortgage underwriting process. If you don't pay your car loan on time, why would we think you'll pay your mortgage on time?
" I got mad at them and decided to stop paying!"
There are several variations to this excuse, but this is the basic one. Believe me, I know that it can sometimes get very frustrating dealing with companies "customer service" departments. I've had my share of run-ins with companies that just don't care. You have a complaint and you call and call and call. You're put on hold, transferred from one department to the next. Told someone will call you back and they never call. You feel your only recourse is to stop paying the bill. Before you do that, ask yourself the question, who is this hurting more, me or the company? Do you really want to see your credit score drop over a $40 collection? If you really feel the company committed fraud, contact an agency that oversees them or your local authorities. If it's a matter of bad customer service, but you received the product, pay the bill and move on with your life.
"Things were really tight and after I paid my car loan and credit card bill, I didn't have enough to pay the mortgage that month!"
Please, please, please, don't ever let this happen to you! Pay your mortgage first and then determine who you can pay next. Although we don't like to see late pays on any accounts, we hate to see them on mortgages! This decision, more than any other, will jeopardize getting a good mortgage rate on a refinance or a new purchase.
"I moved and I didn't get a bill that month!"
This is kind of like "my dog ate my homework" as far as excuses go. You should know what your bills are and who you owe. If you move, it's not up to the company to track you down and give you that bill, it's up to you to make sure the company receives their payment on time. Track who you owe and when those payments are due, it's your responsibility.
So, what's the big deal about some dings on my credit report?
The big deal is:
- Higher rates.
- Less choice in programs.
- Less control over your finances.
- Larger down payments.
Take control of your finances. Be a borrower that lenders compete for your business. It's never too late to improve your credit history and your credit score!
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