It’s no secret that high scores provide better options when you are getting a mortgage loan. Rates and mortgage insurance are cheaper and for first time homebuyers it can be the difference between taking a conventional loan with only 3% down or having to go FHA and put 3.5% down. There are other factors that effect these choices, but for the purpose of this discussion we will consider what it takes to move your score to higher ground in a short time and possibly give you an advantage over other offers in a challenging real estate market.
Tradelines and utilization: Conventional underwriting likes to see at least four of these – paid timely and not over utilized. That means that if you have a credit card with a $2,000 limit, you don’t owe more than 30% of that full line. On that same line, it doesn’t hurt to have empty cards with high credit lines. Having available credit seems to increase the score. So crazy as it may seem, take out another card, use it once and pay it back. You will take a hit to your score initially for new credit and then it should bloom into a higher score.
Collections: These can be a big deterrent on your score. If you discover you have one, unless it just went on there, don’t pay it right away. Instead opt to pay it at closing. If it just went on there, call them and try to negotiate them removing it if you pay it immediately. If it’s an error and is paid, press the collection agency to remove it from your credit record. Get a letter from them saying they are removing it. That way if it shows up, you can dispute it and provide the letter to the credit agency proving your dispute. Make sure the letter references the number of the collection as it shows on your credit, is on letterhead and signed by a manager. The wacky thing about collections is that every time you do anything to one, like make a payment, it treats it like it’s a whole new collection and your score will be hit by it.
Rent: This typically doesn’t show up on your credit report. Seems annoying since it’s typically your biggest bill, right? There are now services you can pay for monthly that will put your rent on your report. This is a super fast way to skyrocket your score. Do an internet search for this and pick one that fits your budget to assist you. Many claim they can up your score by as much as 40+ points in a month or so.
Rapid Rescore: If you fix errors on your report and get it cleaned up, many credit companies offer this service. Ask your mortgage professional about this service if you have done credit cleanup. It’s a way to accelerate the scoring process.
Review your report carefully for errors. Lodge a dispute directly with the bureau that is reporting it. They are required to respond within 30 days. For more information on credit read my previous post on credit.
If you have questions on this or anything else mortgage related and are in the OR, or WA area, please reach out. I would love to connect. If not, find a mortgage broker to assist you.
Have helped buyers of all types and financial levels and worked on 1000's of loans.
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