Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage
This Article Is About Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage
Homebuyers who have bad credit or do not quite meet the minimum credit score requirements to qualify for a mortgage can find some quick fixes.
- Getting credit cards is hands down the easiest and fastest way of rebuilding and reestablishing your credit
- Consumers with bad credit, no credit, outstanding collections and/or charged-off accounts, or a recent bankruptcy and/or a housing event may need to apply for a secured credit card versus unsecured credit cards
- On government loans, credit scores are the biggest factor in how lenders price out mortgage rates
- The higher the borrower’s credit scores, the less risk the lender has
- The less risk the lender has, the lower the mortgage rates
In this article, we will discuss and cover using Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage.
The Importance Of Credit Scores And Payment History
Two of the most important factors lenders put heavy emphasis on when qualifying a borrower for mortgages are the following:
- Besides credit scores, lenders want to see timely payment history in the past 12 months
- No late payments after bankruptcy and/or foreclosure
- Late payments after bankruptcy and/or a housing event is frowned upon by lenders
- One or two late payments after bankruptcy and/or a housing event may not always be a deal killer
Gustan Cho Associates has helped countless borrowers who could not qualify for a mortgage elsewhere qualify and close on their loans at GCA Mortgage Group.
The Importance Of Qualified Income
- Mortgage underwriters will only use qualified income
- Qualified is income that has been vetted and sourced
- Cash income cannot be used as qualified income
- Part-time, bonus, and overtime income are considered qualified income if and only if it has been seasoned for the past two years
- The outlook of the borrower receiving part-time, bonus, and overtime income for the next three years look promising and likely
- Declining self-employment, bonus, part-time, overtime income may disqualify those sources of income as qualified income
Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage is the easiest and fastest way of getting prepped up.
Key To Re-Establishing Credit After Derogatory Event
Why secured credit cards?
- To get unsecured credit cards, consumers need established credit tradelines and higher credit scores
- We will discuss Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage
We will give our viewers some quick fixes to help potential homebuyers who do not qualify for a home loan now get qualified within a matter of a short period of time.
What Do Secured Credit Cards Do?
Two important functions Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage play are the following:
- Establishes credit tradelines
- Instantly boosts credit scores
Importance Of Credit Tradelines:
Credit Tradelines are credit accounts with at least 12 months of seasoning consumers have that report to credit bureaus.
For a lender to consider credit tradelines, the following requirements need to be met:
- Needs to report to credit bureaus
- Have at least 12 months payment history
Active revolving credit accounts with low utilization ratios instantly boost credit scores for consumers who have no credit accounts on their credit report.
- One credit card account can easily boost credit scores by 30 points or more
- For maximum credit score optimization, three credit cards with at least a $500 credit limit are highly recommended
As the new credit card ages, the better it is. An aged credit card with a low balance will maximize consumer credit scores.
How To Get Credit Through Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage
Consumers with the following will experience a difficult time in obtaining new credit:
- Bad Credit
- No Credit
- Limited Credit
- New Credit
- Short Sale
- Deed In Lieu Of Foreclosure
- Charge Offs
- Tax Liens
- Late Payments
Credit Scores And Credit Report
Lenders will review two aspects when reviewing borrower’s credit:
- Credit Scores to see if borrower meets the minimum credit score requirement
- Overall payment history especially payment history after bankruptcy and/or housing event such as a deed in lieu of foreclosure, deed in lieu of foreclosure, short sale
Having timely payments on all consumer debts in the past 12 months is key in getting an approve/eligible per automated underwriting system (AUS).
Bad & Low Credit & How It Affects Consumers
A bankruptcy, short sale, deed in lieu of foreclosure, or a foreclosure can plummet credit scores over 100 plus points instantly.
- Late payments will cause your credit scores to plummet the following month
- Too many credit inquiries will also drop your credit scores dramatically
- A poor credit score can cause you a job
- This is because many employers check an applicant’s credit score as part of the employment application process
- A low credit score can also cost you more in insurance premiums
- All insurance companies run an insurance credit report when issuing an insurance policy to their insurance prospects
- The insurance credit score is part of what determines the premium consumers will pay for homeowners insurance, auto insurance, health insurance, and life insurance
People with bad credit can start rebuilding their credit and start improving their credit scores by the use of secured credit cards.
How To Qualify For Mortgage
FHA Loans are the most popular mortgage program in the United States for first time home buyers.
FHA Loans are also very popular for borrowers with higher debt to income ratios and homebuyers with less than perfect credit.
- Creditors are not willing to extend credit to people who have bad credit or no credit
- Whenever consumers apply for credit, it shows up as an inquiry on their credit report
- Every hard credit inquiry will lower consumer credit scores temporarily
- Multiple inquiries are not viewed favorably by creditors
- Consumers who get rejected by half a dozen unsecured credit card companies, stop applying for any more credit
- This is because the chances of getting an unsecured credit card approved are next to impossible
- Plus the many inquiries that are posted on your credit report will worsen your credit score than it already is
- The easiest and fastest way to start the credit rebuilding process is to get three to five secured credit cards with at least $500 limits
Any credit limits under $500 will have little impact on boosting credit scores but are better than no credit.
Secured Credit Cards As A Powerful Tool To Build Credit
Secured credit cards are an excellent way of building and rebuilding credit.
The way secured credit cards work is consumers need to put down a cash deposit with a secured credit card company:
- In lieu, the secured credit card company will grant a credit limit equivalent to the deposit
- Make sure the secured credit cards get reported to the three major credit reporting agencies
- I strongly recommend that you get three, $500 limit, secured credit cards
By utilizing three secured credit cards consumers will definitely see credit scores improve at least 20 to 30 points per secured credit card.
Types Of Secured Credit Cards
Shopping for secured credit cards is shopping for anything else.
- Try to get the best deal for the money
- There is a processing fee, annual fee, and credit card interest on credit balances even though consumers have deposits
- Purpose of secured credit card is to establish or rebuild credit
- It is extremely important that they report it to all of the three major credit reporting agencies
- Always read the fine print so there are no unexpected surprises
Using Secured Credit Cards To Maximize Credit Scores:
- Use secured credit cards on a regular basis and make sure to pay the balances off every month and just leave a $10 dollar credit balance on each card
- Always pay your monthly credit card bill on time and make a point to pay them early
- Secured credit card companies will report consumer payment history on credit reports
- So do not ruin credit again by being late on secured credit card payments
Importance Of Credit Tradelines
Getting an unsecured credit card will be the ultimate goal.
- After the three secured credit cards have been seasoned for about six months to a year, apply for a few unsecured credit cards
- Apply for just one and the chances are it will get approved
- Wait 90 days and apply for a second unsecured credit card and the chances will be good that the second unsecured credit card will get approved
- Keep using both secured and unsecured credit cards
- Pay minimum payments religiously every month
- Never close out active revolving credit accounts
- Secured and unsecured credit card companies will increase credit limit consistently as the secured credit card ages without asking cardholders for additional deposit
If you have any questions in rebuilding your credit via the use of secured credit cards, contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates is a five-star national mortgage company licensed in multiple states with no lender overlays. Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.