How To Raise Credit Scores To Qualify For Mortgage

This Article Is About How To Raise Credit Scores To Qualify For Mortgage

How To Raise Credit Scores To Qualify For Mortgage?

  • I get many inquiries everyday by home buyers who have decided to become homeowners and who were turned down by other lenders because they did not meet the minimum credit scores
  • The question of How To Raise Credit Scores To Qualify For Mortgage is so common
  • The good news is that I can help any borrower who needs help and are willing to cooperate
  • How To Raise Credit Scores To Qualify For Mortgage?
  • We will cover the various solutions to this question on How To Raise Credit Scores To Qualify For Mortgage

Consult With Loan Officer For Credit Advice

How To Raise Credit Scores To Qualify For Mortgage

Raising one’s credit scores is a two-way process where the loan officer will need full cooperation from the borrower:

  • There are many tricks of the trade that can be quick fixes
  • However, it cannot be done overnight
  • On this blog on How To Raise Credit Scores To Qualify For Mortgage, I will focus this for both my viewers and newsletter subscribers

I will also cover the topic so our new loan officers who just joined Gustan Cho Associates and are ready to train as licensed loan officers.

Reasons For Raising Credit Scores & How To Raise Credit Scores To Qualify For Mortgage

There are two main reasons why borrowers need to raise credit scores.

We will cover this topic and advice on How To Raise Credit Scores To Qualify For Mortgage on this BLOG:

  • The first reason and most common reason is that they need to qualify for a mortgage loan program
  • Many borrowers meet the minimum credit score requirements
  • The second reason why borrowers need to raise credit scores is because of trying to get the very best mortgage rate possible

This holds true especially for homeowners who are looking to refinance their current home loans into a new mortgage with lower rates.

Lower Credit Scores Means Higher Mortgage Rates

Almost all mortgage loan programs have pricing adjustments based on the borrowers’ credit scores.

  • Consumers should always be conscious of their credit scores
  • Not just when qualifying for a mortgage, but always try to have good credit
  • This because good credit and high credit scores will have an impact on insurance premiums
  • The interest rate on credit cards, auto loans, installment loans is affected by consumer credit scores
  • Many employers, especially government employers like Police Departments, Fire Departments, Regulatory Agencies will thoroughly review a job candidate’s credit scores
  • They will also review overall credit payment history during the employment hiring process
  • All loan officers and those in the financial sector industries will have job applicants submit to credit background checks as part of the hiring and/or promotional process

When it comes to lending or obtaining credit, the higher the credit score is, the lower the interest rate and fees will be.

How Can I Raise My Credit Scores To Qualify For Mortgage On Home Purchase

Homebuyers purchasing a home should plan many months ahead in evaluating their credit scores and credit report.

  • Raising credit scores cannot be done overnight
  • It May take several months
  • There is exactly no timeline on how long it will take to raise credit scores
  • It may take one person 45 days or longer to fix their credit
  • But may take several months for other folks
  • A consumer’s credit score is a combination of multiple factors on a person’s credit report
  • Borrowers currently in the mortgage process or about to begin the mortgage process can raise their credit scores

But the mortgage process may be delayed if you are in a hurry to fix errors on credit reports or raise their credit score.

Maximizing Credit Scores Prior To Applying For Mortgage

There are many tools and analyzers like the FICO Analyzer that an experienced loan officer has access to these days:

  • Quick fixes in boosting a borrower’s credit scores can be done by simply doing minor things such as paying down credit cards or adding on to another person’s credit card as authorized users
  • We will cover a quick emergency fast track method of improving credit and boosting credit scores

We will also discuss ways of maintaining good credit and always trying to maintain a high credit score.

Positive Habits To Maintain High Credit Scores

Which means maximizing credit results before applying for a mortgage

Consumers need to always keep in mind that any derogatory credit on your credit report will remain on your report for a period of seven years.

  • This includes a late payment, which can plummet one’s credit scores
  • It is always easy to forget a $10 dollar minimum monthly payment
  • But not paying that minimum monthly credit card payment can not just plummet credit scores but that 30-day late payment will remain on a credit report for 7 years
  • Developing positive habits with regards to credit is the best policy for good credit

All consumers should monitor their credit reports like they monitor their bank and investment accounts.

Tips And Advice In Maintaining And Establishing Good Credit

Here are some tips for maintaining good credit and higher credit scores:

  • Realize the importance of having good credit
  • Make sure to monitor credit scores and credit report like monitoring bank and investment portfolio accounts
  • Set up auto payments for the minimum payment due
  • Pay down credit cards and try to stay at a 10% credit utilization ratio
  • Do not apply for a bunch of credit regularly
  • This is because each hard credit inquiry will drop credit scores
  • Never close out a revolving credit account

This holds true even if you have to pay an annual maintenance fee.

Monitoring Credit Report Regularly 

Monitor credit report regularly:

  • Get a free credit report every year from each of the three credit bureaus
  • Take advantage of that
  • Get one from each of the three credit bureaus every four months
  • This way consumers can monitor credit report three times per year
  • When reviewing a credit report, make sure that it contains no errors

If it does, get the facts and proof and dispute it with the credit bureaus that are reporting the erroneous information.

Re-Establishing Credit After Period Of Bad Credit

Consumers with bad credit, no credit, just filed bankruptcy, had a recent foreclosure, deed in lieu of foreclosure, short sale, had recent collection accounts, charge offs, or other derogatory credit, start re-establishing credit by getting new credit:

  • Getting several secured credit cards is the best way of re-establishing new credit
  • Also, taking out a higher interest loan will re-establish your credit profile
  • These higher risk loans are called alternative lending financing and although your interest rates may be in the double digits, it is good for you to start establishing a credit history

Get into a habit of paying every bill you have on time, including cell phone bills, utility bills, and insurance bills.

Avoiding Negative Routines

Here are tips to the question on How To Raise Credit Scores To Qualify For Mortgage:

  • If credit scores are below 700 FICO and no active credit tradelines, do not apply for unsecured credit cards
  • If you get denied a credit card, do not keep on applying for others
  • This is because each hard credit inquiry is a 2 to 5 point drop off credit score
  • Do not max out credit cards
  • This is because part of credit scores is the amount of available credit

Credit card balance should remain at or below 10% percent of the credit limit.

Active Credit Tradelines On Revolving Accounts

How to avoid a negative routine

Do not close out credit card accounts without credit balances:

  • This holds true even though you do not use them and have to pay an annual fee
  • Part of credit scores are derived with the age of the credit tradelines and available credit on credit cards
  • Do not do credit disputes prior to, or during the mortgage process on non-collection accounts and charge offs
  • This is because this will halt the mortgage process on hold credit disputes has been retracted

Once the credit bureaus correct errors on the credit report or if they decide to leave the derogatory credit item on the credit report, retract the dispute verbiage off the credit report.

Advice On How Do You Raise Credit Scores To Qualify For Mortgage

There are several tips on how do you raise credit scores to qualify for mortgage. However, need to realize why credit scores are low.

Here are some questions you need to ask yourself and see if the reasons below are the reasons why your credit scores are low:

  • Is it because of no credit tradelines?
  • Are the credit scores low because the credit cards are maxed out?  
  • Is it because of recent collection accounts and charge-off accounts?
  • Is it because of a recent judgment?
  • Is it because of an old collection account that got re-reported as a new collection account because it was sold to a new collection agency?
  • Is it because you just paid a partial payment on an old collection account?

The above are a few reasons why credit scores may be low. We will discuss some solutions on how do you raise credit scores to qualify for a mortgage.

How Do You Raise Credit Scores To Qualify For Mortgage When You Have No Credit Tradelines?

Credit scores may be very low because consumers do not have any credit tradelines.

Here are some bullet points you need to consider:

  • Cannot have a late payment
  • Pay all of the bills that do not report on credit report on time and still have low credit scores
  • The key here is that you need to add new credit that adds to credit report
  • Doing so, credit scores will increase
  • How to get new credit if credit scores are low?

Easiest And Quickest Way Of Raising Scores And Rebuilding Credit

The easiest and fastest way of rebuilding credit and boosting credit scores with no credit is by getting secured credit cards:

  • For maximum credit boost, consumers should get at least three secured credit cards
  • Each credit card having at least a $500 credit limit
  • Always have a little balance on new secured credit cards
  • Less than $50 dollars on your credit card balance will maximize credit scores
  • Never have a zero credit card balance

How To Raise Credit Scores To Qualify For Mortgage By Adding On As An Authorized Credit Card User

Adding yourself on as an authorized credit card user can be a great tool to boost credit score only if the main user is your spouse or someone who lives together with you.

  • Credit bureaus have gotten wiser with consumers adding themselves on as authorized credit card users to boost their credit scores
  • So if you have a different last name and do not live together with the main user at the same place, adding yourself on as an authorized user will serve no positive purpose in boosting credit scores

However, if you have the same last name as the main credit card user and have the same address, then it can definitely increase credit scores.

Credit Disputes To Increase Credit Scores

How To Raise Credit Scores To Qualify For Mortgage By Adding On As An Authorized Credit Card User

There is a short term fix in boosting your credit scores with credit disputes.

  • However, this method is cheating the system to qualify for a mortgage and once the disputes are resolved, credit scores may go back down
  • Lenders will use the credit scores that they initially pulled for a period of 120 days
  • So it is alright for credit scores to drop during the mortgage process
  • Here are some bullet points to consider when trying to boost your credit scores by disputing exempt line items allowed under FHA Guidelines On Credit Disputes
  • This is not a long term solution but does work to get an instant boost in credit scores
  • FHA Guidelines on credit disputes state that you can have credit disputes on medical collections and non-medical collections account with zero balances

However, you cannot have credit disputes on any non-medical collection accounts if outstanding balances are over $1,000 or you have charged-off accounts.

Reason Why Credit Disputes Halts Mortgage Process

The reason why the mortgage process comes to a halt when you have credit disputes is that the credit bureaus will take the derogatory credit account off the credit scoring formula:

  • But the derogatory item will remain on the credit report
  • Since the derogatory credit item under credit dispute will not be counted on the scoring of  credit scores, your credit scores will instantly go up
  • After the credit dispute is resolved and if the creditor verified derogatory as being valid and it remains on the credit report, the credit dispute verbiage will be marked as resolved
  • Therefore the derogatory item will remain
  • That item will be counted back into the credit scoring formula
  • Since the derogatory credit item is being counted into the credit scoring formula, credit scores will then drop
  • This is because it is like adding a new derogatory credit item on a credit report
  • This is the case if you have a credit dispute and need to retract it off the credit report for the mortgage process to proceed
  • When you retract a credit dispute, then credit scores can drop
  • Sometimes it will plummet depending on how bad the derogatory credit item is

Quick Fixes On How To Raise Credit Scores To Qualify For Mortgage

If you need to boost credit scores to qualify for a mortgage and need a few points to boost, review credit scores:

  • See if you have any recent medical collection accounts and/or non-medical collections with no balance
  • If so, dispute derogatory medical collections, as well as derogatory credit items with zero balances and credit scores, will go up
  • Also, if you have non-medical collection accounts with a total outstanding collection balance of under $1,000, then you can dispute those derogatory credit items and your credit scores will go up
  • Sometimes it may jump over 70 or more FICO Points depending on how recent the collection account is

Tips On How To Raise Credit Scores To Qualify For Mortgage

This blog on How To Raise Credit Scores To Qualify For Mortgage was written by Gustan Cho. For more tips on boosting your credit scores on advice on how to raise your credit scores to qualify for a mortgage, contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at Gustan Cho Associates at [email protected] We are available 7 days a week, evenings, weekends, and holidays.

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