10 Tips to Protect That Good Credit Score
Did you know that you can damage your chance of getting that pre-approved loan approved for your home purchase?
The process for a mortgage loan involves: qualification, pre-approval, approval and lock. Just because you have your pre-approval letter, it does not mean that you are assured of moving to the next step of approval. Pre-approval is conditional and changes to your credit score can affect the lender’s decision to approve the loan.
During the loan process, there are some things you can do and some you can avoid to ensure your credit rating remains in the good zone. Following are some tips to help you move to the approval step.
- Pay all existing accounts on time—if you receive even one 30 day notice, it can cause damage to your credit score
- Use your credit cards in your normal manner—changing your purchase patterns can cause a red flag and lower your credit score
- Do not apply for any new credit, buy or lease a new car or co-sign for any loans—these actions will each cause a “ding” and lower your credit score
- Don't close credit card accounts - it causes your debt ratio to increase, negatively affecting your score
- Request a letter of deletion from the creditor if you want to pay off any old accounts—this will delete collections from your credit report resulting in a higher score
- Keep your credit card balances 30% below their limit during the loan process—if you want to pay down your balances, pay down all of them
- Don't consolidate debt - consolidating all of your debt to one or two credit cards will make it appear that you have maxed out your cards resulting in a penalty
- Maintain stability - changing jobs, starting a new business or switching from a salaried to a commission pay rate can cause your loan to be disapproved
- Avoid large transfers - transferring large sums of money between bank accounts and making random undocumented deposits to your accounts can cause the lender to disapprove your loan
- Be careful with cash gifts - if you receive a cash gift to help with your home purchase, make sure you fill out the proper paperwork to avoid any problems
As a full time Realtor, I've have seen this first hand so many times and heard from fellow Realtors how their clients too, get an accepted offer and decide to celebrate by going out for extravagant dinners or buying a car. In doing so, a home loan for which the poor buyer was pre-approved has now fallen apart due to a change of just 20 points drop on their credit score.
I am dedicated to helping and coaching my clients to reach their real estate goals. I look out for their best interests and help keep them on track. It would be a shame to have your heart set on purchasing the home you fell in love with, only to have your dream dashed because your action caused your credit score to change and your lender to deny your loan.
It is critical to maintain your good credit so that you can obtain the best interest rate and terms when looking for a mortgage. Even a difference of two points can change the interest rate you will qualify for, so be attentive of your actions which would have an adverse effect on your credit score.
I hope these tips help you lock the best rate and terms for your new home. If you are looking in Southwestern Ohio, I know the greater Dayton Area well and am very in-tune with what's going on with Troy, Tipp City, Huber Heights and the Dayton area local markets. I can tell you what a good offer would be, and my concern is getting you the home you want at an attractive price.