BE CREDIT READY

Too many home buyers wait until it’s too late to prepare their credit report for a mortgage application.  Six to 12 months is not too early to start. If you think you need a lot of work, it is recommended to start 12 months out. This will give you plenty of time to correct any errors, payoff credit cards, dispute any items and determine how to deal with collections, judgements, or tax liens. If you don’t have any credit, you have time to build it in a 6–12-month time frame. Preparing your credit report ahead of time can save you money in the lending rate. It’s worth it to strive for and maintain a 720-credit score.  

HOW TO GET YOUR CREDIT READY FOR A MORTGAGE APPLICATION

1st American Rule Number 1. 

Never hire a credit repair company. Most Credit repair companies are a scam you do not want to get tangled in. Go to FTC.gov and you will see the numerous complaints about credit repair companies. You will spend a lot of money, get little results, and end up being scammed. Instead, learn the credit game yourself and be in control of your credit scores for life.  Learn the credit rules and learn how play the credit game from our Youtube channel.  Now we are going to get your credit ready for a mortgage application. 

How to Manage Credit Report Errors Yourself

Write letters! Handwrite your letters. Why? Because the scammer credit report repair companies type them. Your handwritten letter means you are a real person. Include a copy of your driver’s license with a current address on it. Explain your error and how you would like it resolved. I have written hundreds of letters for clients and have been able to get bankruptcies, late payments and collections removed. It is not impossible, it takes effort, it's free and you can win! 

TIP: Don’t use the credit bureaus “dispute link”. You want to send an old-fashioned handwritten letter to the addresses below. Your letter will be read and acted on. The credit bureaus have 30 days to respond to you. 

Addresses for Credit Bureaus.  

Transunion Consumer Solutions

P.O. Box 2000

Chester, PA 19022-2000

Experian

P.O. Box 4500

Allen, TX 75013

Equifax Information Services 

P.O. Box 740256

Atlanta, GA 30348

Have You Seen Your Credit Report In The Past 12 Months? Where do you pull your own credit report? 

Let’s talk Credit Karma, Credit Sesame etc. These are credit card apps. These provide you with your credit card credit score not your mortgage credit score. Sorry to disappoint you, a Credit Karma score will always be higher than your mortgage scores. Why? A five-thousand-dollar credit line is much easier to obtain then a $400,000 loan.  

Pulling your own credit doesn’t impact your credit score because you are pulling it. It is considered a “soft” hit verses a “hard” hit. Soft inquiries are just that, an inquiry. Lenders just see scores and not account or trade line details. It will show up as an inquiry which is only about a 3–5-point hit - No big deal. Click here – More about credit inquires.    

A hard pull is a detailed credit report of your current and past mortgages, auto loans and credit cards. Lenders require this version when the loan application is submitted for loan approval.  

1st American Rule Number 2: Pull your own credit report.  

1. Free Version you can pull weekly. No score is provided.  www.annualcreditreport.com Recommended for credit repair, credit safety and maintenance.  
2. Paid Version. (MyFICO report) You get scores. https://www.myfico.com/products/fico-score-credit-reports

To see your mortgage score you can pull one report with all three credit bureaus. This is highly recommended prior to applying for a mortgage. The cost is $60.00.

This will give all the information you need to help you prepare for the home loan application process. Share your report with your loan officer. You and your loan officer can put a plan in place for improving your scores, paying off credit cards, dealing with collections etc. Your loan officer won’t have to “soft” pull your report because you already did.  

When you view your MyFICO report, you will see lots of scores, auto scores, credit

card scores and mortgage scores. You want to find Score 8. Score 8 is the score mortgage lenders use.  

What are Trigger Leads? 

Do you receive credit card offers in the mail?

It is a myth that the lender pulled your credit without your consent. The creditors purchase data from the three credit bureaus that fit their parameters.  

For example, they will pull scores over 680, in 85263 zip code, with no mortgage lates, or any collections”.  If you fit the profile, you get a bombarded with offers.  

Why should you care about trigger leads? When a loan officer pulls your credit for your loan application, it “triggers” to the credit card companies a new lead has emerged that fits their parameters-ding-ding-ding! Now you get bombard from oodles of credit card companies and lenders. I had a client get 40 calls a day for a first week. If you want to avoid these annoying calls, you want to see the next rule.  

1st American Rule Number 3. Manage Trigger Leads 

1. When online shopping be sure to “check” the box on the checkout page that states “Don’t Sell My Information”.  
2. OPT OUT of mail and phone call solicitations. Here is how. 

• For mail: https://www.optoutprescreen.com/
• For phone: https://www.donotcall.gov

Note: It can take 30 days to be removed. Do this as soon as possible to reduce the annoying calls you receive.  

At this point you pulled your credit report and didn’t hire a credit repair scammer. You opted out of trigger leads. Then you notice some negative items on your credit report. Now what do you do?  

1st American Rule Number 4: You can heal from any derogatory credit

The best thing about credit, it is dynamic. Nothing on your credit report is permanent.  Anything and everything can be repaired. I have helped many clients fix up their credit reports. They come in with 500 FICOs discouraged. I put a plan together based on what is on the report and what is not on the report. Improvement can happen in as little as 30 days or a year depending on what you are working on.  

NO CREDIT – No Problem! What is the FASTEST way to get a credit score? 

Do you know someone who has great credit and would be willing to make you an authorized used? My client, who has a 780 FICO put his son on his oldest credit card as an authorized user. We’ll come back to why the “oldest” card. His son had no credit. His mother did the same, within 30 days, the son has a 720-credit score, he qualified for a loan, purchased a home, and moved in. Thanks Mom and Dad.  

An authorized user can use the credit card but has no financial responsibility.  Mom/Dad pays the bill – mom and dad may not happy if your charge it up. The card shows up on your credit report and the scoring model scores it as yours! Yahoo! But, if they have any late payments, so you do. Choosing someone who manages their credit well and piggybacking as an authorized user is the fastest way to credit and a credit score. 

The dad and mom in the above story specifically used their “oldest” credit cards because all that history (20 years of credit history) goes onto the authorized users report. The credit scoring models love credit history. The older the card the more the scoring model likes it. TIP. Don’t close any credit card accounts. Only payoff installment loans. Those will show “paid as agreed”.  

No one is willing to make you an authorized user. No worries. Get a secured credit card. You can ask your bank about opening a secured credit card. You will need $500 to “secure” it. Use the card; buy gas or groceries and pay it off.  In 60 days, you will have a score. It will score it as “new” credit so it may not be a great score. As time goes on it will get better.  

1st American Rule Number 5: Don’t be so fast to payoff collections. 

Judgment, tax liens and medical no longer show up on your credit report. But that doesn’t mean lenders don’t see judgments and liens. Underwriters run a “lien and judgment” report and may take those into consideration when approving your loan. You may be asked by the lender to pay those off. Do you have the funds to pay these off if asked? 

With medical collections you get a 12-month moratorium. After 12 months any unpaid medical bills will show up in the collections section on your credit report. An underwriter may ask that these be paid after the 12-month window has expired.  

Anything that shows up in the Collections section will pull your credit score down. Should you pay off old collections? Wait don’t pay it off just yet. Ask your Loan Officer. Paying off old collections only makes them current and could hurt your score. This is why you run your credit report long before you are going to apply for a loan. These kinds of things can be handled before you get into a mortgage application. If the lender doesn’t care about old collections, then don’t pay them.  

Student Loan Forgiveness 

Let’s talk about student loan forgiveness. How will this impact my credit? Student loan forgiveness will “DEPEND” on how the lender reports it.  

Since we have never had student loan forgiveness, we don’t know how the lenders will report the “forgiveness” to the credit bureaus. Will they report it like a short sale; a settlement for less than amount due. Or a charge off? Or not paid as agreed? None of these options are favorable. It is a wait and see situation.  

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