- 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 and changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.
- Don’t apply for a new credit card 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.
- 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.
- 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 percent 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.
- Don’t consolidate your debt onto one or two 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 in number four. If you want to save money on credit card interest rates, wait until after closing.
- 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. This will also affect other factors in the score such as length of credit history.
- Don’t pay late. Stay current on existing accounts. Under the new FICO scoring model, one 30-day late payment can cost you anywhere from 50-100 points, and these points take several months if not years to recover.
- Don’t allow any accounts to run past due, even one 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.
- 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. 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.
- Don’t make any unusual transactions. Don’t move money from one account to another and no split deposits. Deposits and withdrawals must be clearly traceable.
- Don’t pay earnest money from someone else’s account. Earnest money must match the bank statement exactly. Do not purchase a cashier’s check or money order with part cash and part check. The cashier’s check or money order must match the amount withdrawn from the bank account exactly.
- Don’t receive cash as a gift for down payments. Gift funds must be documented with a gift letter and the amount of the gift must match the donor’s bank account and the recipient’s bank account exactly. Copies of bank statements from both the donor and recipient are required unless wired directly to the closing attorney.
- Don’t lose contact with Academy Mortgage. 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, Academy Mortgage can supply you with the resources you need in order to avoid making mistakes that could drop your credit scores or possibly cause you to lose the loan.
For more information on home loans or to get started with the loan process for your real estate in Atlanta, contact Academy Mortgage.
Equal Housing Lender. (c)2013 Academy Mortgage License #3113. GA Lic. # 20505. This is not a commitment to lend. Academy Mortgage Atlanta: 5565 Glenridge Connector, Suite 400. Atlanta, GA 30342. Georgia Residential Mortgage Licensee.