Your credit balance affects your credit performance

How Credit Balance Impacts Credit Scores To Qualify For Mortgage

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About How Credit Balance Impacts Credit Scores To Qualify For Mortgage

Borrowers Need To Realize How Credit Balance Impacts Credit Scores To Qualify For Mortgage: To get the lowest possible mortgage rates is to have the highest credit scores. Lenders judge and quote a borrower will get by their credit scores. Higher credit scores mean lower risk for the lender. Lower risk means lower mortgage rates. It is important to maximize your credit scores to the highest level possible prior to applying for a mortgage. Just paying down all of your credit card balance to a10% credit utilization ratio can boost consumer credit scores. In this article, we will discuss and cover how to boost your credit scores prior to applying for a mortgage.

How High Credit Card Balance Can Lower Your Credit Scores

How High Credit Card Balance Can Lower Your Credit Scores

High Credit Balance Impacts Credit Scores Negatively:

Consumer credit scores play a huge impact on the mortgage loan approval process.

There are two major factors that will determine whether or not borrowers qualify for a residential mortgage loan:

  • Income
  • Credit scores

To qualify for a 3.5% down payment FHA loan, borrowers need a minimum credit score of 580.  However, with any credit scores below 620, the debt to income ratios are capped at 43% debt to income ratios back end. There are no front-end debt-to-income ratio requirements unless the particular lender have overlays For those who have credit scores of higher than 620, the front-end debt to income ratios gets a huge boost to 46.9% and the back-end debt is capped at 56.9%. Having bad credit scores will always hurt. However, the good news is that low credit scores are temporary situations. Credit scores can be boosted by simple quick fixes.

Easy Quick Fixes To Boost Credit Scores: Credit Balance Impacts Credit Scores

Consumers with maxed out credit cards, this will be hurting credit scores significantly. This is due to high credit balance impacts credit scores

  • Home Buyers planning on buying a new home in the near future, the first thing to do is to pay down credit cards
  • High credit balance impacts credit scores
  • Paying down credit cards to below a 10% credit balance will greatly improve credit scores
  • However, paying down credit cards will not automatically increase credit scores the next day

It normally takes 30 or more days for credit card companies to update and report on all three major credit bureaus:

  • Transunion
  • Experian
  • Equifax

Those with three credit cards who have high credit balances who currently have a credit score under 580 can easily boost their credit scores north of 620 by paying down their credit cards. For the maximum credit boost effect, borrowers should pay down their credit card balance and just leave $10 dollar balance.

 Don’t Pay Off Old Collection Accounts

Why not pay off your old debt collection accounts

Borrowers with old collection accounts that have not been satisfied, leave those alone and not pay them. Borrowers can qualify for unsatisfied collection accounts, charged-off accounts, and derogatory credit. Everyone can get a home loan with bad credit as long as they have income and prove the source of income. However, timely payments on all debt reporting to credit bureaus in past 12 months are normally required to get approve/eligible per Automated Underwriting System. By paying an old collection account, what it does is re-activates the old derogatory account and make it a fresh derogatory account also known as Date Of Last Activity (DLA). By re-activating an old collection account, credit scores can drop. I have seen credit scores drop 80 or more points when consumers paid off an old collection account.

Opening Secured Credit Cards To Increase Scores

Borrowers low credit scores due to no credit and prior bad credit, getting secured credit cards will boost credit scores significantly.

Each secured credit can possibly boost credit scores by at least 20 or more points for those with no credit or very little credit. 3 to 5 secured credit cards will really maximize credit scores and credit scores will gradually improve as secured credit cards age. If you can, adding an installment credit account will strengthen your credit profile and scores.  Please go to RESOUCES of this website to see how to build and boost your credit scores.

Qualifying For Home Loan With Bad Credit

How to qualify for a home loan with bad credit

  • Home Buyers who need to qualify for home loan with bad credit with a mortgage company licensed in multiple states with no lender overlays can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at We have zero lender overlays on FHA, VA, USDA, and Conventional Loans. Gustan Cho Associates is a mortgage company licensed in multiple states and experts of non-qm loans and bank statement loans for self-employed borrowers. All of our pre-approvals are not issued unless we are confident that it will close. Not just close, but close on time. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Commercial And Residential Mortgage Information Center

Similar Posts

One Comment

  1. I have student loan which is bringing my debt ratio high. I was pre-approved somewhere else but only for 50,000. I was wondering what other things I could do to get pre-approved for something higher

Leave a Reply

Your email address will not be published. Required fields are marked *