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The Top 10 Credit Do’s & Don’ts
During the Loan Process |
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- 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. 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 2-50 points for one hard inquiry.
- DON’T PAY OFF COLLECTIONS OR CHARGE
OFFS during the loan process. 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, and make sure that: 1) You validate that
the debt is yours, and 2) That the creditor agrees to give
you a letter of deletion.
- DON’T CLOSE CREDIT CARD ACCOUNTS.
If you close a credit card account 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, and make sure it is a more recent account.
- DON’T MAX OUT OR OVER CHARGE ON
YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring
your score 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, make an
extra payment on all of your cards at the same time.
- 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.
- 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.
- DO JOIN A CREDIT WATCH PROGRAM. If you
join a credit watch program, you can check your reports
weekly, or even daily depending on the program you select.
(When you pull your own reports, you don’t get dinged
for a hard inquiry.) This way, if something does show up
on your reports that has caused your score to go down, you’ll
know it immediately, and you may be able to take care of
the problem before closing.
- DO STAY CURRENT ON EXISTINGING ACCOUNTS.
Like your mortgage and car payments. One 30-day late can
cost you anywhere from 30-75 points.
- DO CONTINUE TO USE YOUR CREDIT AS NORMAL.
Red Flags are raised easily with the scoring system. If
it appears that you are changing your pattern, it will raise
a red flag, and your score could go down.
- DO CALL YOUR BROKER if you receive something
in the mail from a creditor or collection agency that you
believe may affect your score during the loan process. Your
broker may be able to supply you with the resources you
need to stop any derogatory reporting to the bureaus.
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