How To Maximize Credit Scores To Qualify For FHA Loans


How To Maximize Credit Scores To Qualify For FHA Loans

This BLOG On How To Maximize Credit Scores To Qualify For FHA Loans Was UPDATED On October 19th, 2018

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

Home Buyers credit and credit scores are one of the most important factor that dictates whether they will get a 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 from hurting credit and credit scores

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 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

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 because this task  will lower the amount of credit available to 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

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 loan, 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 faster response.  Or email us at 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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