Within the past 6 months, credit bureaus have continued to tighten up the guidelines.  Some changes may or may not impact you as much but take a moment to educate yourself to maximize your credit potential when you are purchasing or refinancing real estate.  Please contact us with specific questions.

1.  Don’t pay off old collection or charge offs

Uness you can negotiate a delete letter, paying collections will usually decrease your credit score immediately due to the date of last activity becoming recent.  The only time you would do this is if you are instructed to do so after careful review of your credit by a mortgage advisor and a credit repair company.

1.  Don’t max out credit card accounts

This is typically the fastest way to bring credit scores down 50-100 points.  Try keeping your credit card balances below 30% of their available limit at all times during the loan process.  If you decide to pay down balances, consider doing it across the board – meaning pay balances to bring your balance to limit ratio to the same level on each card.

1.  Don’t consolidate your debt

It seems like this would be the smart thing to do; however when you consolidate all of your debt into one credit card, it may appear that you are maxed out on that card and the system will penalize you as mentioned below.  If you want to save money on credit card interest rates, wait until the transaction closes.

4.  Don’t close any credit card accounts

If you close a credit card account, you may lose available credit and it might appear to the FICO that your debt ratio has increased.  Also, closing a card may affect other factors in the score such as length of credit history.  I you have to close a credit card account, think about doing it after closing.

5.  Don’t pay late

Stay current on existing accounts.  Under the new FICO scoring models, one 30-day late could cost you anywhere from 50-100 points.  Points lost for late pays may take several months if not years to recover.

6.  Don’t allow any accounts to run past due – even 1 day!

Most cards offer a grace period; however, what they may not tell you is that once the due date passes, that account could show up past due on your credit report.  Past due balances can also drop scores by 50+ points.

7.  Don’t lose contact with your mortgage and real estate professionals

If you have any questions towards real estate and home loans we can provide answers or direct you to someone who can.  Both real estate and financial markets constantly change so never hesitate to contact the Mortgage Reel for clarity and confidence.