By Gary Gugliotti
Good Faith Mortgage
Don’t pay off collections or charge offs during the loan process. Paying collections will decrease the credit score immediately due to the date of the last activity becoming recent. If you want to pay off old accounts, do it through escrow, and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a deletion letter.
Don’t close credit card accounts. If you close a credit card account 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 you have to close a credit card account, do it after closing, and make sure it is a more recent account.
Don’t max out or over charge on your credit card accounts. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all your cards at the same time.
Don’t consolidate your debt onto 1 or 2 cards. It seems like it would be a smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above in. If you want to save money on your credit card interest rates, wait until after closing.
Don’t do anything that will cause a red flag to be raised by the scoring system. This would include adding new accounts, co-signing on a loan, changing your name and address with the bureaus. The less activity on your reports, the better.
Don’t change your job. Job stability is very important during the loan process. Lenders will almost always call to verify employment just before closing. If you must change jobs or are transferring to a new position, make sure your mortgage consultant is aware of the change, and that the job is in the same field or you can show a benefit for the change such as better pay, benefits, ect. Changing from a salary job to a commission job is a sure way to cause problems for your loan. If you are in doubt, call me at 843-478-6119 0r 843-207-8100.
Do stay current on existing accounts. Like your mortgage and car payments. One 30-day late can cost you anywhere from 30-75 points.
Do continue to use your credit as normal. Red flags are raised easily with the scoring system. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.
Do call me if you receive something in the mail from a creditor or collection agency that you believe may affect your credit score during the loan process. I may be able to supply you with the resources you need to stop derogatory reporting to the bureaus.