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Credit Checklist

While considering home financing your credit score has a significant impact on your options. This worksheet is designed to address the major factors that contribute to your credit score. In addition you will find rules to follow while obtaining your new home financing. 

Late Payments: While obtaining new financing it is imperative you pay all your bills on time. A single late payment on a credit card can drop your credit score 80 points. 

Balances: Balances on credit cards can also have an adverse effect on your credit score. Consumer or revolving credit is measured in quarters - below 25%, below 50%, below 75%, below 100%. Each of these plateaus has an impact positive or negative on your credit score. Staying below 50% of your highest credit limit on any revolving credit card will help guarantee your credit scores do not fall to a dangerous level. 25% is obviously better, 75% clearly worse, but 50% is an excellent rule to live by. Do everything in your power to not exceed this mark. 

Inquiries: As a general rule, inquiries have a negative effect on your credit. The type of inquiries – consumer, installment, mortgage, or personal - all have a different impact on credit, and should be considered independently. While obtaining home financing avoid all inquiries except for mortgage inquiries. This means avoid new credit cards, or car shopping, and do not check your own credit score (all will read and score differently than a mortgage report anyways). It is necessary to run your credit before an accurate quote addressing rate, terms, and program options can be given, and should not be avoided. A professional knows how to minimize inquiries during the financing process, and how to stretch the length a credit report is valid, while someone inexperienced can ruin a score by running multiple reports every 30 days. 

Collections: Collections or past delinquent debts must be handled carefully. Before rushing to pay a collection consult with your home loan specialist. Paying these off may increase your credit score in the long run, but can have a negative effect on your score immediately. A professional has the ability to check whether or not you will recognize an immediate increase or decrease in your credit score should you decide to pay off a collection. 

Public Records: Bankruptcies, judgments, tax liens, etc… otherwise known as public records must be handled carefully as well. As a general rule this type of debt will need to be paid, however it is recommended that you do not take any action without consulting your home loan specialist first. 

Mortgage or Rent History: You want to make sure you are current on your mortgage or rental payment history for at least 12 months. Late payments are measured in 30 days – 30, 60, 90, 120. Late mortgage or rent payments will drop your credit score, and lower your mortgage grade, which is a double negative in the home lending industry. Avoid late mortgage or rent payments by any means necessary. 

Credit Rules While Obtaining New Home Financing: 

- Do not apply for any new debt. This includes financing a new car, applying for a new credit card, financing new furniture, or department store cards. If you are planning to do any of these things, wait until your new home loan has funded. 

- Do not authorize unnecessary inquiries. 

- Pay all your bills on time. 

- Keep your credit card balances under 50% of the credit limit (there are options to accomplish this goal). If at all possible get your balances below 25%. 

- Do not cancel or close any credit cards unless specifically instructed to do so by your home loan specialist. 

- Consider disputing derogatory remarks on your credit report. You home loan specialist can help you accomplish this. 

- If your credit scores are low and you have someone with excellent credit and a clean payment history willing to add you to one of their credit cards that has a low balance in relation to the credit line take them up on it. You will instantly share their payment history, and your score will improve. 

- Do not admit to or make any partial payment to any collectors that happen to call. This is considered an omission of guilt and will drop your scores, instead dispute the collection. You are innocent until proven guilty and the burden of proof is on the collection agency. 

- Do not cash any “checks” that are sent to you unless you know that they are from a reliable source. 

- Make sure to stay current on your mortgage or rent payments. If possible you want a clean 12 month mortgage or rent history. 

These rules are credit fundamentals, and should be followed regularly to help maintain excellent credit. Of course life happens and your credit score will fluctuate. If something does happen that has an adverse effect on your score, you do have options when working with a professional. When working with the right person you can fix your credit in as little as ten days. If something does happen contact your home loan specialist immediately so they can address any area of concern before it becomes a significant and impassible obstacle. This includes any issue you are anticipating.

 

California Bureau of Real Estate License 01792241
NMLS License 523235


1649 Calavo Rd. Fallbrook, CA 92028
831.325.6959 Phone
866.321.5467 Fax
email@culturemortgage.com

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