Important “Need to Knows” about
Your Credit Report
An important step to preparing yourself for Buying a House After one of these tough situations is to prepare your credit to be desirable again to lenders. Your credit report and the information it contains is one of the first documents a lender needs to review in the process to pre-qualify a potential buyer, even one who hasn’t gone through a foreclosure, short sale, or bankruptcy. The credit scores obtained are a very significant part of the process today, but are not the only determining factor. Lenders take into account all the activity reported on the credit report including any late payments, judgments against you, tax liens, debt collections and charge-offs. I have had borrowers who have had a credit score which meets or exceeds the mortgage lending guidelines, but due to other negative activity reflected in their credit report and profile they were not able to qualify and obtain a mortgage.
Here are a few tips on improving your credit scores:
Pay your bills on time ~ Any delinquencies that have happened in the last twenty four months will carry more significance than previous issues.
Try to keep outstanding credit card balances low ~ Make a concerted effort and practice to hold balances on any revolving lines of credit (like credit cards) at or below the 30% level of each credit limit at least 60-90 days before pre-qualifying for a mortgage.
Don’t close credit accounts ~ When you have paid off a credit card balance, do not follow your instinct to close the account, especially if you have had the credit account open for a reasonable amount of time. Accounts with history and duration can assist in keeping credit scores up.
Hold inquiries into your credit to a minimum ~ Too many inquiries in to your credit within the previous year will negatively impact your overall credit scores on your reports.
It is important to apply for a secured credit card ~ Many banks today will issue you a credit card that is secured by a savings account at that bank. Once you have shown a good payment history, generally a year or so, the bank will release the secured requirement.
A couple of credit related issues for you to keep in mind:
Disputed accounts on your report are becoming issues with lenders~
Fannie Mae has an automated underwriting/approval system, called DU, which now insists any “disputed” items be removed from your credit report for your mortgage to be eligible for delivery to Fannie Mae for final approval. In today’s market, there are many borrowers who have items being disputed on their credit reports for one reason or another. We would be able to provide letters explaining any disputed items in the past, but unfortunately this will not be sufficient in most cases today.
During tax season identity theft increases by more than 7% ( March thru June)~
A great proactive approach to take is to request a Security Freeze from the credit bureaus to avoid ID theft. The Security Freeze does not give access to anyone, with exception to current creditors, the ability to pull your credit report prior to you approval. If you allow credit to be checked, you can un-freeze the credit bureaus for a period of time needed to access it and then re-freeze your credit again when done.
Cherry Creek Mortgage provides all clients with a 1 year subscription to an ID Theft Protection Service free of charge!
I’m sure you’ve heard the commercials before, but you can obtain free copies of your credit reports from the following website: www.annualcreditreport.com
The credit scores of many borrowers, especially those who have experienced foreclosure, short sale, and bankruptcy, has suffered the last few years in our Arizona market. If you have a set a goal of buying a house after one of these tough situations and want to develop a plan to improve your credit to buy a home when your waiting period is over, contact me! With guidance on improving your profile and being kept up to date on mortgage lending updates, we can work together to have you on the right path to owning your own home again.
Kelly Zitlow
Certified Mortgage Planning Specialist – Certified Mortgage Instructor
Vice President – Cherry Creek Mortgage
Direct: 480.398.4908 Cell: 602.561.6760
kzitlow@ccmclending.com www.kellyzitlow.com
NMLS # 164330 AZ BK # 0904024
