Tips And Advice On Maximizing Credit Scores For Home Loan

Home Buyers Should Consider Maximizing Credit Scores For Home Loan

This BLOG On Tips And Advice On Maximizing Credit Scores For Home Loan Was UPDATED On January 20th, 2018

Maximizing Credit Scores For Home Loan:

Credit scores will dictate the interest rates you get from a creditor, especially a mortgage lender.

  • Creditors view credit scores as the risk level
  • Mortgage loan borrowers should consider maximizing credit scores for home loan prior to the mortgage application process
  • The higher the credit scores, the lower risk a consumer is
  • The higher the credit scores the lower mortgage interest rates are
  • In the mortgage industry,  credit scores will be the determinant on what mortgage rate borrowers get
  • Maximizing credit scores for home loan is extremely important to get the best rates
  • To qualify for the lowest mortgage rate possible on a residential mortgage loan, borrowers need credit scores north of 740

Credit Scores Affects Homeowners Insurance Premiums

  • Credit scores also determine what homeowners insurance premium will be
  • The higher credit scores, the lower insurance premium

Employment And Job Promotions

Employers also do credit checks and use credit history as part of background investigation.

  • Employers view lower credit score candidates as those who are not responsible
  • Everyone can have superior credit as long as they monitor their credit report and use their credit cards the correct way and get a variety of credit and pay their bills on time
  • We will discuss on ways of maximizing credit scores for home loan on this blog and ways of improving credit scores if they have lower credit scores

Everyone Can Have Great Credit

Those who are planning on purchasing a new home or refinancing home in the near future should start planning on improving credit scores and have a goal to have a 740 plus credit score.

  • Improving credit scores does not happen overnight and takes time
  • Sometimes it can take months while other times, it can take a year or more depending on how bad your credit is
  • For those who just filed bankruptcy or just had a foreclosure, deed in lieu of foreclosure, or short sale, their credit scores might be in the high 400’s or low 500’s
  • The good news is that for these folks, their credit scores will gradually improve over time and as time passes, the bankruptcy or foreclosure will have lesser of an impact on their credit scores
  • After two years, most derogatory items normally have no impact on credit scores
  • To expedite boosting credit scores, you need to re-establish credit scores by adding positive credit
  • Secured cards are a great example
  • Each secured credit card you get will boost credit scores by 20 or more points
  • Get 3 to 5 secured credit cards for those folks who have just filed bankruptcy or had a foreclosure
  • I have seen mortgage loan borrowers have credit scores of 700 plus after they filed bankruptcy or had a foreclosure after a year
  • The longer re-established credit is, the better credit scores will be

 Maximizing Credit Scores For Home Loan And Tips On Improving Credit Scores

  • Hard inquiries: 
    • Every time someone applies for new credit, they will get penalized for a hard inquiry
    • Each hard inquiry will drop credit scores by 2 to 5 points
    • However, the drop will be offset by the new credit the borrower will get
    • Do not apply for credit that applicants do not have a chance of getting approved
    • For example, it will not be wise to apply for unsecured credit cards when credit scores are in the 400’s or 500’s
    • Do not go on a credit card applying spree
    • Only apply for one or two credit cards every three to six months
  • Have a credit balance below 25% of your credit limit on your credit cards: 
    • Do not have a balance of greater than 10% balance of credit limit on credit cards
    • Having maxed out credit cards will plummet credit scores
    • However, the drop is just temporary and when you pay down credit cards, credit scores will go right back up
  • Make sure you pay your bills on time: 
    • Never be late on monthly payments
    • One late payment will impact your credit scores by 40 or more points and mortgage lenders do not want to see any late payments for the past 12 months
    • One late payment will take over 6 months to recoup the credit score drop
    • Even if minimum payment is $10.00 and you are late, credit scores will drop and will have a very negative impact on credit report
  • Do not close out credit cards you do not use: 
    • Never ever close out credit cards or department store credit cards that are not being used
    • Closing out an aged credit account that are not being used will hurt credit scores
    • Part of credit scores are a history of credit
    • The credit available and have worked hard to have such credit cards so never close them out
  • Diversification of credit:
    • Diversification of credit will maximize credit scores
    • Consumers can have three credit card account
    • But having student loan accounts, auto loan accounts, mortgage account, and other revolving or installment credit will maximize credit scores
  • Monitor your credit report and see what you need to do in maximizing credit scores for home loan
    • Get annual credit report from each of the three credit reporting agencies by clicking on www.annualcreditreport.com
    •  Don’t request all of them at the same time
    • Get one credit report from each credit bureau every four months
    • For example, consumers are entitled a credit report from
      • Transunion
      • Experian
      • Equifax
    • Get one from Transunion in January, get one from Experian in April, and get one from Equfax in August
    • This way consumers can monitor credit report three times a year for any errors

The Gustan Cho Team at USA Mortgage is a direct lender with no mortgage lender overlays on government and conventional loans. Home Buyers who need to qualify for mortgage with a direct lender that has no overlays, please contact The Gustan Cho Team at Loan Cabin at 262-716-8151 or email us at gcho@loancabin.com.

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