How To Maximize Credit Scores To Qualify For FHA Loans

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This BLOG On How To Maximize Credit Scores To Qualify For FHA Loans Was UPDATED And PUBLISHED On March 18th, 2020

How To Maximize Credit Scores To Qualify For FHA Loans

Tips On How To Maximize Credit Scores To Qualify For Mortgage:

Home Buyers’ credit and credit scores are one of the most important factors that dictate whether they will get loan approval.

  • It also determines how much interest rates you will be charged on credit cards, auto loans, and mortgage loans
  • Having bad credit and low credit scores will cost you tens of thousands of dollars, if not hundreds of thousands of dollars, over the course of life in higher interest costs
  • Here are some tips to maximize credit scores and things to avoid hurting credit and credit scores

In this article, we will discuss and cover How To Maximize Credit Scores To Qualify For FHA Loans.

How To Maximize Credit Scores To Qualify For FHA Loans: No More Than 10% Of Credit Limit

Carrying high credit balances will definitely lower your credit scores.

  • However, the good news is that the drop of credit scores due to high balances is just temporary
  • Credit scores will go right back up by paying down credit balance down to 10% of the credit limit

Having a 10% credit balance or less will maximize your credit utilization ratio which comprises 30% of overall credit score.

Not Closing Out Active Credit Accounts Is Way On How To Maximize Credit Scores To Qualify For FHA Loans

Don't closing your active credit accounts is a way to maximize your credit results in order to qualify for FHA loans

Closing out an active credit card account will hurt credit score.

  • Many people close out credit card accounts that they no longer use
  • However, by doing so, they are hurting themselves and killing credit that has been seasoned
  • The reason this hurts credit scores is that this task  will lower the amount of credit available to the consumer which will lower debt utilization ratios

The longevity of credit history is part of overall credit score so keeping a credit card that has been aged will help maximize credit scores.

Avoiding Late Payments Is Another Way On How To Maximize Credit Scores

Consumer payment history will make up 35% of credit scores.

  • Recent late payments will most likely drop credit scores at least 50 plus points and will take months to recoup this loss
  • Many lenders frown on any late payments in the past 12 months and a large percentage of them will not accept any borrowers with late payments in the past 12 months

There are lenders that will not accept anyone who had a late payment after a bankruptcy and/or foreclosure.

Credit Inquiries

What are the credit inquiries?

Each hard credit inquiry can drop your credit scores by 2 to 5 points.

  • Consumers who need to apply for credit, do so but do not apply to a dozen credit accounts all in a month
  • Aggressive credit inquiries will not only drop credit scores but will also create a red flag to potential creditors

Creditors will look at too many inquiries as a credit risk that the person applying for credit can become overextended and pose a high credit risk, thereby, denying the credit request.

Borrowers With No Credit Scores

For those with no credit and no credit scores, this can pose a problem also.

  • Having no credit or credit scores can similar to having bad credit because creditors will not extend credit to those with no credit or payment history
  • Everyone should start establishing their credit as soon as possible
  • The best way to establish new credit or re-establish bad credit is by getting three secured credit cards with a minimum of a $500 credit limit

Having a diversified credit profile is important.  By diversity, we mean not just credit cards but credit cards, auto loans, installment loans, mortgage loans, etc.  Diversity of credit account 10% of overall credit score.

Borrowers who need to qualify for FHA Loans with a direct lender with no lender overlays on FHA Loans and Conventional Loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response.  Or email us at gcho@gustancho.com. Over 75% of our borrowers are folks who either gotten a last-minute loan denial or are stressing during their mortgage process. We have no lender overlays on FHA Loans, VA Loans, USDA Loans, and Conventional Loans. We are available 7 days a week, evenings, weekends, and holidays.

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