Credit Score Tips For The Best Mortgage Rates

Just as the article below states there is so much to know about improving your credit score.  It is important to keep your credit card balances below 30% of your credit limit.  Another is to not pay off a collection account in the middle of trying to get a loan. 

Credit reports are going to play an even bigger role starting June 1st due to Fannie Mae’s new Loan Quality Initiative (LQI).  Starting June 1st lenders are going to have to confirm that the borrower did not take on any new debts.  In order to prove this did not occur we are going to have to pull a new credit report right before closing.  I am not sure if we will be pulling updated credit scores as of yet but what I can tell you is to not use your credit cards, buy a new card, apply for a credit card, etc. once your loan has started.  Keep your credit report the same way other than making your monthly payment on time or paying down your debt.  Do not close out any account either. 

I just listed to a conference call yesterday on credit reports and they talked about how with a short sale you want it to show up as a paid account, not settled for less than owed, etc.  On loan modifications, your credit score will take a hit as of right now.  Very shortly they are going to change the credit score code from the current of AC, which does hurt your score, to CN which will not hurt your score as long as your loan has been paid on time.  If you got a loan modification and have paid it on time but your score has been impacted ask your mortgage servicer to change the code from AC to CN. 

I have a great handout that I can email to you if you want a lot of great information on credit reports and scoring.  Just send me an email with the subject loan “Credit Report Handout” and I will send you a copy.