Avoid these common credit blunders when applying for home loan
The mortgage industry relies on accurate credit reporting to make credit decisions when granting people home mortgages. Here’s some of the things that can hurt your mortgage chances and not only your credit score, but your odds of getting approved.
With the amount of information online with regards to credit, many consumers are getting more and more information about how to manage credit, get credit and how to manipulate and or improve their credit scores. The amount of information that’s out there can be so overwhelming that you might think you’re doing something positive for your credit, but you could be doing something detrimental and wouldn’t know it until it comes time to apply for a mortgage.
Following is what you need to know in regards to keeping your credit score as high as possible to get a good mortgage.
Do not apply for a mortgage when you have disputed credit accounts.
Disputing credit accounts artificially makes your credit score rise because during the time the account is in dispute the obligation is invisible to scoring. Additionally, the lender cannot run an automated underwriting system so they get a misread on your true financial picture for qualifying. Take all your accounts out of dispute first then let your lender run credit then run automated underwriting in that order.
Freezing credit. Freezing your credit due to identity theft for example such as the Equifax scandal from last year is a wise move. However, if you are applying for a mortgage make sure to remove all frozen credit. A lender cannot obtain all the three credit scores needed when accounts are frozen.
Refusing to let the lender pull a copy of your credit report for fear that you don’t want your credit report pulled too many times. A lender cannot give you any loan qualification for pre-approval or really give you any specifics on what they can do for you without pulling a copy of your credit report. Pulling a copy of your credit report does not automatically make your credit score drop when applying for a mortgage contrary to widespread belief. When people are applying for mortgage along with applying for other types of credit at the same time, then your score can take a small hit. This is because it appears you have financial mismanagement to the credit bureaus when aggressively consenting to multiple credit pulls.
If your credit score needs work most lenders can recommend options for getting your credit score up by paying down credit cards in most cases which can and sometimes raise your credit score anywhere from five to 10 points all the way up as high as 40 points in some cases.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.