1. DON’T DO ANYTHING THAT WILL
CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM.
This would include adding new accounts, co-signing
on a loan, changing your name or address with the
bureaus. The less activity on your reports during
the loan process, the better.
2. DON’T APPLY FOR NEW CREDIT OF
ANY KIND. Including those “You have been pre-approved”
credit card invitations that you receive in the mail or
online. Every time that you have your credit pulled by a
potential creditor or lender, you lose points from your
credit score immediately. Depending on the elements in
your current credit report, you could lose anywhere from
one to 20 points for one hard
inquiry.
3. DON’T PAY OFF COLLECTIONS OR
CHARGE OFFS during the loan process. Unless you can
negotiate a
delete letter, paying collections will
decrease the credit score immediately due to the date of
last activity
becoming recent. If you want to pay
off old accounts, do it through escrow – at
closing.
4. DON’T MAX OUT
OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the
fastest way to
bring your scores down 50-100 points
immediately. Try to keep your credit card balances below
30% of their
available limit at ALL times during the
loan process. If you decide to pay down balances, do it
across the
board. Meaning, pay balances to bring
your balance to limit ratio to the same level on each
card (i.e. all to
30% of the limit, or all to 40%
etc.).
5. DON’T
CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems
like it would be the smart
thing to do, however,
when you consolidate all of your debt onto one card, it
appears that you are maxed out
on that card, and the
system will penalize you as mentioned above in 4. If you
want to save money on credit
card interest rates,
wait until after closing.
6. DON’T CLOSE
CREDIT CARD ACCOUNTS. If you close a credit card
account, you will lose available credit,
and it will
appear to the FICO 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.
7. DON’T PAY
LATE. Stay current on existing accounts. Under the new
FICO scoring model, one 30-day late
can cost you
anywhere from 50-100 points, and points lost for late
pays take several months if not years to
recover.
8. 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, that account will show a past
due amount
on your credit report. Past due balances
can also drop scores by 50+ points.
9.
DON’T DISPUTE ANYTHING ON YOUR CREDIT REPORT once the
loan process has started. When you
send a letter of
dispute to the credit reporting agencies, a note is put
onto your credit report, and when the
underwriter
notices items in dispute, in many instances, they will
not process the loan until the note is removed
and
new credit scores are pulled. Why? Because in some
instances credit scoring software will not
consider items in dispute in the credit score
- giving false data to the lender.
10
.DON’T LOSE CONTACT WITH YOUR MORTGAGE & REAL ESTATE
PROFESSIONALS. If you have a
question about whether
or not you should take a specific action that you
believe may affect your credit reports
or scores
during the loan process, your mortgage or real estate
professional may be able to supply you with
the
resources you need.
The President of
Credit Resource Corporation, Linda Ferrari is a leading
nationwide expert in the credit
reporting and scoring
industry. Her expertise and knowledge of the credit
industry is of the highest level,
supported by more
than 17,000 cases to date. Linda is a regular guest on
San Diego's 1700AM Bizradio
show and she has also
appeared on Fox Business News 97.1 KLSX Making
Money Talking Dollars Making
Sense and Vegas
Investors Edge.
