During the loan process, there are some Do’s and Don’ts. Being qualified for a lower rate and locking in the best loan for you are all dependent on your credit history and risk. Some reasoning’s may be more obvious than others, but below is a list of Tradition Mortgage’s Top 9 credit score “Don’ts” during the loan process.
- DON’T do anything that will cause a red flag to be raised by the scoring system. This includes adding new accounts, co-signing on a loan & changing your name/address with bureaus. The less activity during the loan process, the better!
DON’T apply for new credit of any kind. Including the “You have been pre-approved” credit card invitations you receive in the mail or online!
- DON’T pay off collections or charge off accounts during the loan process. Unless you negotiate a delete letter, paying collections will decrease your credit score immediately due to the late of the last activity becoming recent. If you want to pay off old accounts, do it through escrow at closing.
- DON’T max out or over charge your credit card accounts. This is the fastest way to bring your credit scores down 50-100 points immediately! Try to keep credit card balances below 50% of the available limit at ALL times during the loan process.
- DON’T consolidate your debt onto 1 or 2 credit cards. When you consolidate all your debt onto one card, it may appear you are maxed out on that card and the credit system will penalize you as mentioned above. If you want to save money on credit card interest rates, wait until after closing.
- DON’T close credit card accounts. If you close credit card accounts, you will lose available credit and it will appear to the credit system that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing.
- DON’T pay late. Stay current on existing accounts. Under the new credit system’s scoring model, a 30-day late payment can cost you anywhere from 50-100 points and points lost for late payments take several months to recover.
- DON’T allow any accounts to run past due – even 1 day. Most cards offer a grace period; however, what they don’t tell you is that once the due-date passes, your account will show a past due amount on your credit report. Past due balances can also drop scores by 50+ points.
- DON’T dispute anything on your credit report (once the loan process has started. When the underwriter notices items in dispute, in many instances they will not process the loan until the dispute is removed and new credit scores are pulled.
If you have questions about whether or not you should take a specific action that may affect your credit reports or scores during the loan process, your Tradition Mortgage Specialist may be able to supply you with resources to help avoid making mistakes that could drop your credit scores or cause you to lose the loan. For further questions, contact us at 952-920-5100 or info@traditionllc.com.