Do I or Don’t I? That is a loaded question when it comes to Credit!
As Loan Officers, we are frequently asked by our clients, “What can I do to improve my credit score?”. There are many Do’s and Don’t of Credit, which will not just to raise your score, but just as importantly, it will help you to make sure you don’t lower your credit score! I have a passion for helping my clients improve their financial situation before, during and after the loan process. I hope that this information will help;
- Stay Current on Existing Accounts – One 30 day late can cost you!
- Continue to Use your Credit as Normal – If it appears you are changing your credit pattern, it will raise a red flag and your score could go down.
- Call your Loan Officer before life changing events to discuss – Call before making any address or credit changes that may affect your score or balances. This is especially important now because we must run credit just before the close of escrow to ensure that no new credit has been obtained: and that balances on existing credit haven’t increased.
- Disclose all debts and payments. Make your Loan Officer Aware of any debts that may not appear on your credit report. We must account for all liabilities for which you are responsible. If you are purchasing multiple properties at the same time, even if they haven’t closed yet, or have just closed, those must be disclosed on your loan application; or they could hold up your closing or even prevent it.
- Apply for new credit. Every time you have your credit pulled by a potential creditor or lender, it can affect your credit score and we must include the new debt on your application; no matter when in the process you get it. This includes co-signing for a loan for someone else.
- Pay off collections or “charge-offs”. If you want to pay off old accounts, do it through escrow. Be sure to request a “letter of deletion” from the creditor.
- Close Credit Card Accounts. If you close a credit card account, it may appear that your debt ratio has gone up. Closing a card will affect other factors in the score, including credit history.
- Max out or over-charge credit card accounts. Try to keep your credit card balances 30% or more below their limit during the loan process – less than 50% of the limit is best. If you pay down balances, do it across the board on all credit cards.
- Consolidate your debt. When you consolidate all of your debt onto one or two credit cards, it will appear that you are “maxed out” on that card and your credit score will be penalized.
If you have any questions about the Do’s and Don’t of Credit during the loan process, please call Lisa Amato, Vice President/Branch Manager – Integrity 1st Mortgage, at (480) 244-6490.