Ways Of Improving Credit Scores To Qualify For Mortgage


This ARTICLE On Ways Of Improving Credit Scores To Qualify For Mortgage Was UPDATED And PUBLISHED On November 20th, 2020

Gustan Cho Associates Mortgage Group specializes in mortgage lending for borrowers with lower credit scores.

We have seen every credit profile from a perfect 850 credit score all the way down to credit scores in the 400s.

  • In this blog, we will detail a few pointers on how to raise your credit score, examples of what not to do while trying to fix your credit, and a few important credit score milestones
  • We will go over the importance of credit and how to get an approve/eligible per automated underwriting system

In this article, we will cover and discuss Ways Of Improving Credit Scores To Qualify For Mortgage

Fastest Ways Of Improving Credit Scores To Qualify For MortgageWays Of Improving Credit Scores

Ways Of Improving Credit Scores To Qualify For Mortgage does not have to be a frustrating process.

There are thousands of Americans who do not use credit. Meaning they pay cash for everything their entire life:

  • Unfortunately, their credit scores are horrible
  • You have to use credit responsibly to have a good credit score

Ways Of Improving Credit Scores To Overcome Derogatory Credit Tradelines

First, we will go over a few items that negatively impact your credit score:

  • Late payments
  • Collection accounts, even medical collections
  • Charged off accounts
  • Judgments
  • Bankruptcies
  • Foreclosures
  • Default auto loans (repossession)
  • High credit card balances
  • Disputed accounts
  • Inquiries

The items above will have different levels of negative impact on your score.

  • We will start with late payments, one 30-day late payment on a revolving credit card will hurt your credit score less than a 60-day late payment on your mortgage
  • Different credit accounts types will have different levels of impact on your credit score

The longer you go without paying, the more impact it will have on your score.

Ways Of Improving Credit Scores With Outstanding Collections And Charged-Off Accounts

It should come as no surprise that collection accounts will negatively impact your score.

  • A medical collection will still have a negative impact on your credit score but not as bad as a non-medical collection
  • A recent collection account will impact your score more than a collection account from years ago
  • Just because an account of yours has been “charged-off” by a creditor, does not mean it is not affecting your credit score
  • Even an account that reads “charged-off” on your credit report will have a negative impact on your credit score

Bankruptcies will affect your credit score.

Ways Of Improving Credit Scores When Qualifying For A Mortgage With A Bankruptcy

We help thousands of clients who are currently in a chapter 13 bankruptcy, and their credit scores usually hover around 600.

Default account such as a mortgage foreclosure or an auto repossession will have lasting negative effects on your credit report.

Ways Of Improving Credit Scores With Low Credit Utilization RatioWhat are Ways Of Improving Credit Scores With Low Credit Utilization Ratio

High credit card balances negatively impact your credit score.

  • Paying the utilization down as low as possible will increase your credit score
  • Paying down revolving accounts is one of the fastest ways to raise your credit score
  • If your credit card is maxed out, it will have a strong negative affect
  • Paying that card down to 50% utilization will help, ideally. you want to pay your credit card below 10% utilization and not all the way to $0

Paying the car down to $0 will remove the trade line from your credit score algorithm.

Credit Dispute Mortgage Guidelines During The Mortgage Process

We mentioned the disputed accounts above.

  • Disputed accounts can put a wrench in your mortgage qualifications
  • When an account is disputed on your credit report, it removes it from your credit scoring model
  • This is why lenders require you to remove the verbiage “dispute” in order to qualify for a mortgage
  • Disputed accounts are allowed in certain manual underwriting situations
  • But the general rule of thumb is all Non-medical disputes totaling over $1000 need to be removed from your credit report

For more information and how to remove the spirits please read our HOW TO REMOVE DISPUTES BLOG.

Ways Of Raising Your Credit Scores To Qualify For A Mortgage

Now that we know some items that will negatively impact your credit score, let’s focus on a few different ways to raise your scores.

  • As mentioned above, paying down your high balance revolving credit cards is one of the fastest ways to raise your credit score
  • Pay it as low as possible but not all the way to $0
  • Paying collection-accounts can sometimes negatively impact your credit score
  • When you pay a collection account, sometimes it shows as a recent derogatory item having a negative impact on your credit score
  • For the majority of collection accounts, we only recommend paying them ONLY if the creditor will complete a true “pay to delete”
  • Make sure you get something in writing from your collection agency stating they will do a pay to delete
  • This means when they receive the money for the collection, they remove it at the credit bureau level
  • It is incredibly important to get something in writing
  • This is because many collection agencies say they will do a pay to delete and then they do not follow through

Please visit EXPERIAN’S WEBSITE for more information on collections.

Credit Score Milestones

Everybody wants the highest credit score possible but there are a few major credit score milestones to aim for.

  • If your credit score is really low, aim for a 580 credit score
  • This will allow you to utilize an FHA loan with only 3.5% down payment
  • The next important milestone is 620, which is the minimum qualifying credit score for conventional mortgage programs
  • Every 20 points give you a slightly better interest rate
  • For example, having a 680 credit score will get you a better interest rate than a 660 credit score
  • They are broken into 20 point increments

See below:

  • 580-599
  • 600-619
  • 620-639
  • 640-659 and so on

Ways Of Improving Credit Scores By Checking Your Own Credit

What are the ways to improve your credit score

Using a free credit tracking tool such as credit karma is a good way to monitor your credit.

  • However, these are not accurate for mortgage credit scoring
  • Your mortgage score is more than likely lower than your credit karma score
  • When you see your credit karma scores come up, chances are your mortgage scores are also up
  • Using this tool is better than having your credit ran every 30 days

When you are working on your credit score, it is important not to have hard inquiries on your credit report.

Hard Versus Soft Credit Inquiries

These hard inquiries will drop your credit score.

  • Besides the actual credit score, another milestone is the length of on-time payments
  • For most loan programs, you need 12 months of on-time payments
  • Keep in mind, we do allow for a missed payment here in there on some of our mortgage products

Please call us directly for more information.

Qualifying For A Mortgage With A Direct Lender With No Lender Overlays

The Team at Gustan Cho Associates are experts in credit reports. We have seen every tier of credit more than once. We are a full-service mortgage lender without any LENDER OVERLAYS. We are available seven days a week for any mortgage or credit-related questions.  If you have been working on your credit or need tips to raise your credit score, please give us a call. We are able to help more families than most lenders as most lenders have strict credit score overlays. 75% of our clients have been turned down by a different lender or are not getting the one on one customer service they deserve.  we hope to hear from you, please contact us at GCA Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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