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What Home Buyers Need to Know About Their Credit Score When Buying a Home

Have any of you wondered what affects your credit score the most and how your credit score affects getting a mortgage?

Watch this interview with Jennifer Cowan, Co-Owner of The Cowan Connection Team- Keller Williams Realty and Lisa Myers, Director of Sales and Marketing at Credit Technologies, Inc.  discussing on what home buyers need to know about their credit score when buying a home. It is worth the watch!


What Home Buyers Need to Know About Their Credit Score When Buying a Home.

I had the pleasure of attending a great continuing education class in April that was hosted by one of our preferred lenders, Supreme Lending, and it was out of this world! This CE class was all about credit!

As a real estate agent, I have learned over the last 14 years in the business how a Buyers credit score and what types of things are on their credit affect their ability to obtain a mortgage and actually close on the house they want to purchase. It is part of my job as my client’s REALTOR, to dig deep with them in the very beginning of the home buying process about their finances, credit, and anything that could potentially prevent them from obtaining mortgage on their dream home.

Having the knowledge about what home buyers need to know about their credit score when buying a home and knowing the who to  refer them to when they need help improving their credit score is so important.

In my CE class, I had the pleasure of hearing Lisa Myers, Director of Sales and Marketing at Credit Technologies Inc., servicing the mortgage and real estate industries, teach us some very important things about credit and what affects your credit scores that most people would not know! I even learned a few things that could improve my own personal credit!

Did you know there is a difference between a Consumer Credit Score and a Mortgage Credit Score?

  • The mortgage industry pulls FICO Scores (Fair, Isaac and Company).
  • A Consumer Credit Score is an Educational “Vantage” Credit Score
  • Credit Karma pulls Consumer Credit Scores
  • Your Consumer Credit Score can be significantly higher than your Mortgage Credit Score. A Consumer Credit Score can be 30-100 points higher than your Mortgage Credit Score
  • Certain things affect your Consumer Credit Score that DO NOT affect your Mortgage Credit Score.

What has the biggest impact on your FICO score?

There are 5 factors that make up your FICO score. The most important factors that impact your FICO score are:

  • 35% is Payment History- Length of credit history and do you pay them on time. The last 24 months of reporting history makes up the majority of your FICO score.
  • 30% is Credit Cards and Balances. Pay at least the minimum each month and keep the balance at 20% of the credit limit or lower on per card.

Is Cash Always King? Will it be difficult for me to get a mortgage if I do not have a credit card?

If you do not have a FICO score you will not be able to get a mortgage. If you want to buy a home, plan ahead.

  • You want at least 6 months of major credit card reporting history to generate a FICO score.

How many credit cards should I have open and how my credit card balance affects my credit score.

  • 1-3 major credit cards not department store cards
  • Make sure your credit card balances are 20% of the card limit or lower

What is the quickest way to improve my credit score?

I get this question a lot when I work with Buyers that need to pay off certain credit cards or collection accounts in order to get be approved for a mortgage.

  • Contact a professional to evaluate which credit cards or collection accounts to pay off in order to maximize credit score improvement.
  • Make sure credit card balances are at 20% of credit limit or lower per card.
  • Get medical collections/ regular collections paid and deleted from your credit report.
  • Plan ahead. Start the pre-approval process at least 90 days before you are ready to buy a house in order to have time for any credit improvements.

Can I get a collection account removed from my credit report?

Yes! In most cases you can. How do I get a collection account removed from my credit?

  • Contact the collection agency. Ask to speak to a supervisor
  • Pay account in full in exchange for a letter of deletion from credit report. Do not settle the account for less.
  • If you have a medical collection and the collection agency does not agree to delete it from your credit report once paid in full, contact the credit bureaus and file a dispute.

Do multiple mortgage inquires hurt my credit score?

This is one of the biggest concerns I hear from home buyers when thinking about shopping lenders. Here is the reality…

  • Little to no impact on your Mortgage Credit Score.
  • In the 1st 30 days in a 12-month period all mortgage inquiries are ignored and have no impact on your mortgage credit score.
  • For 45 day rolling time period after 1st 30 days only 1 inquire is counted. So, in 75 days if you have 10 mortgage inquiries only 1 will impact your score.
  • Multiple mortgage inquiries can impact your Consumer “Vantage” Credit Score.

  What impact do tax liens have on my credit score?

Tax Liens do not impact your FICO score any longer, but that does not mean that loan officer, underwriter or closing attorney will not find them. A good loan officer or underwriter will be able to find it. Make sure to be up front with your REALTOR and lender so they can put a plan in place for you to get your loan approved.

I am getting divorced. Will my divorce affect my credit? How can I protect my credit when getting a divorce?

When getting a divorce, you may end up in a situation where joint accounts or accounts designated to be paid by one party per the divorce settlement agreement are not paid on time and can really affect your credit. How do you prevent divorce from ruining your credit?

  • Get removed from your mortgage if both parties are on the loan In order to do this, one party must refinance the loan in order to take the other party off the loan. If you are just removed from the title and not the mortgage and there are late payments, you will see it on your credit report.
  • Remove yourself from any joint credit card accounts.

If you are getting divorced and need to sell a home or buy a home, it can be a tricky process. Make sure to ask your REALTOR what is the best time to sell a home or buy a home when getting divorced. They will guide you through the process and know what documents will be required by the lender and closing attorney.

Are you ready to buy a home? Make sure to know what home buyers need to know about their credit score when buying a home! Do you have questions about how to improve your credit score before applying for mortgage loan?

Contact The Cowan Connection Team to learn more about the home buying process and to put a strategic home buying plan in place that will work for you and your lifestyle.









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