Increasing Credit Scores Before Applying For a Mortgage

This guide covers increasing credit scores before applying for a mortgage. Increasing credit scores before applying for a mortgage is important to get the lowest mortgage rates. The number one factor in determining mortgage rates by lenders is the borrower’s credit score. Other factors determine mortgage rates.  But credit scores have the biggest impact.

For borrowers who are planning on applying for a mortgage, it is recommended to increase their credit scores months before completing a loan application.

Gustan Cho Associates is a five-star national mortgage company with no lender overlays on government and conventional loans.  Over 80% of our borrowers at Gustan Cho Associates could not qualify at other lenders. This is because of their lender overlays. The team at Gustan Cho Associates are experts in helping borrowers qualify for a mortgage by helping borrowers increasing credit scores to qualify for a mortgage. We will offer tips and tricks for boosting and maximizing your credit scores in this blog.

Increasing Credit Scores And Checking For Errors on Credit Reports

The average home loan in the United States is $435,750. Therefore, even a mortgage rate reduction of 0.125% makes a huge difference in monthly payment savings. A lower rate means lower monthly payments. Lower monthly mortgage payments mean tens of thousands of dollars in savings throughout a 30-year fixed-rate mortgage.

Increasing your credit scores before applying for a mortgage will save you money. Higher credit scores mean lower mortgage rates.

It is no rocket science to boost your credit scores. However, increasing credit scores does take time. It cannot be done overnight. It is recommended that borrowers try to maximize their credit scores a few months before applying for a mortgage. The team at Gustan Cho Associates are experts in helping borrowers maximize their credit scores before applying for a mortgage.

Maintaining and Increasing Credit Scores Paying Bills Timely

Maintaining good credit scores and a timely payment history is very important. Not only can a high credit score save you tens of thousands of dollars throughout a home loan, but it can also save you money on other things. Consumer credit scores also determine insurance premiums.

The higher the credit scores, the lower the insurance premiums on auto, health, and property insurance. Employers use good credit scores in their hiring and promotional processes. Employers judge a person’s credit based on their financial responsibility.

Many employers will not hire or promote candidates with low credit scores and bad credit. The following actions will help you maintain good credit scores: Make timely payments on all monthly debts that report to credit bureaus, as well as utility bills that do not report to credit bureaus. This accounts for 35% of your FICO score. This should be common sense. Even a $1 monthly late payment is considered a late payment and will stay on your credit reports for seven years. If there is a collection agency notifying you, please take action right away and see what they want.

What Are Revolving Accounts

Revolving accounts are credit cards. The credit card utilization ratio is the balance compared to the credit limit on all revolving accounts. Credit card utilization accounts for 30% of your FICO credit score. The amount of credit used on a credit card account is called your credit utilization ratio. The credit utilization ratio makes up 30% of your FICO score.

The consumer’s payment history accounts for 35% of the consumer’s overall credit score. This is why it is important not to close out any active credit card accounts.

A mixture of types of credit makes up 10% of consumer credit scores. It is recommended to have different types of credit tradelines to maximize your credit scores. Instead of just having credit card accounts, it is better to maximize credit scores by combining credit cards, instalment accounts, auto loans, department store cards, personal loans, and mortgage loans.

How New Credit Tradelines and Credit Inquiries Impact Credit Profile

10% of the overall credit score is due to new credit accounts or inquiries. Whenever you apply for new credit, the creditor will pull a hard credit inquiry. Hard credit inquiries will cause a drop of 2 to 5 FICO points. However, the drop is only temporary. The credit score drop from a hard credit inquiry will go back up in three to four months. Hard inquiries will remain on the credit report for two years. Soft credit inquiries do not drop credit scores. New debt on your credit report will lower your credit scores. For example, a new car loan will cause a drop in your credit score. However, as the balance goes lower, your credit scores will increase.

How Aged Credit Tradelines Impact Credit Scores

Aged credit tradelines account for 10% of your credit score. Many consumers want to close credit card accounts with zero balances they do not use. Why pay an annual credit card membership fee on credit cards you don’t use? That annual fee is a bargain on how strong that aged credit card is for your credit profile. The older a credit card account is, the stronger the positive impact the card has on your credit scores and credit profile. The average age of your credit tradelines accounts for 10% of your credit score.

Increasing Credit Scores For a Mortgage Being an Authorized Credit Card User

Many credit card companies will report the main credit card user’s credit profile to the authorized user as well. The main credit card user can request that a family member or friend be added as an authorized user.

The benefits of being an authorized user are if the main user pays their bills on time and has a low credit card balance, it will report on the authorized user as a positive.

However, if the main credit card user is late on their monthly payments and has credit card balances maxed out, it will do more damage than good for the authorized user. Gustan Cho Associates strongly advises against having an authorized user credit card unless necessary.

Increasing Credit Scores By Correcting Errors on Consumer Credit Reports

Every consumer is entitled to one free credit report once a year from Experian, Equifax, and Transunion. Consumers are highly advised to take up this offer and review their credit reports for errors.

If there are any errors or the credit report does not show on-time-paying credit tradelines, you need to contact the creditor and the credit bureaus and have them correct this.

The credit bureau will initiate an investigation once it receives the consumer credit dispute request. The bureaus have 30 days to fix the errors on your credit report. Consumers can dispute credit via USPS, online, or by telephone.

Contact Information To Credit Bureaus

Here is the contact information for the three major credit reporting agencies:

Credit Bureaus Dispute Info TransUnion LLC

• Consumer Dispute Center
• P.O. Box 2000, Chester, PA 19016
• Online: http://dispute.transunion.com
• Phone: 800-916-8800, 8 a.m.–11 p.m. EST

Experian Dispute

• P.O. Box 4500 Allen, TX 75013
• Online: http://www.experian.com/consumer/upload/
• Phone: (714) 830-7000

Equifax Information Services LLC

• P.O. Box 740256, Atlanta, GA 30374
• Online: http://www.equifax.com/personal/disputes
• Phone: (800) 846-5279