Maximize Credit Scores To Qualify For FHA Loans

How To Maximize Credit Scores To Qualify For a Mortgage

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers how to maximize credit scores to qualify for a mortgage. Tips on how to maximize credit scores to qualify for a mortgage. Homebuyers’ credit and credit scores are among 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, throughout life in higher interest costs. In the following sections, we will review some tips to maximize credit scores and avoid hurting credit and credit scores.

How To Maximize Credit Scores To Qualify For a Mortgage No More Than 10% Of Credit Limit

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Carrying high credit balances will lower your credit scores, says Dale Elenteny, a senior loan officer at Gustan Cho Associates. However, the good news is that the drop in credit scores due to high balances is temporary. Credit scores will go back up by paying down the credit balance to 10% of the credit limit. A 10% credit balance or less will maximize your credit utilization ratio, comprising 30% of your overall credit score.

How To Maximize Credit Scores To Qualify For a Mortgage By Not Closing Out Credit Cards

Don't closing your active credit accounts is a way to maximize your credit results in order to qualify for FHA loansClosing out an active credit card account will hurt your 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. This hurts credit scores because this task will lower the amount of credit available to the consumer, lowering debt utilization ratios. The longevity of credit history is part of the 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 likely drop credit scores by at least 50 plus points, and it will take months to recoup this loss. Many lenders frown on late payments in the past 12 months and will not accept any borrowers with late payments in the past 12 months. Some lenders will not accept anyone who has a late payment after a bankruptcy 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 drop credit scores and create a red flag for 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 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 be 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 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 accounts for 10% of overall credit score.

Borrowers who need to qualify for a mortgage with a lender with no lender overlays on FHA, VA, USDA, and Conventional loans, please get in touch with us at Gustan Cho Associates at 800-900-8569 or text us for a faster response.  Or email us at Over 80% of our borrowers are folks who either got a last-minute loan denial or are stressed during their mortgage process. We have no lender overlays on FHA, VA, USDA, and Conventional Loans. We are available evenings, weekends, and holidays seven days a week.

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