Category | Credit Matters
In my last blog, I addressed a few of the most common misunderstandings about how credit relates to the mortgage process. In part two of this three-part blog series I discuss the misunderstanding and realities of credit scoring. Let's take a look!
#1 One of the most common questions asked is, “My scores are bad, but my wife's are good… can you just use hers and ignore mine?”
Unfortunately, no. I must use the lowest of the middle score of all borrowers. Each borrower has three scores. I take the middle score of each borrower and then use the lowest of these scores for mortgage qualification purposes. This is a federal guideline (there is no way around it). It’s important to understand that a borrower’s credit score will impact the programs available and rate Greenway can offer.
#2. “I was late paying my $12 GAP bill. What’s the big deal?”
In this circumstance, the amount of payment is not relevant. Magnitude not relevant. It’s the fact that you didn’t pay on time. One 30-day late payment will reduce your score by up to 110 points, regardless of how much you were late paying.
Here's how some other derogatories will ding your credit score:
- Collections: -200 points
- Maxed Credit Card: -45 points
- BK: -240 points
- FC: -160 points
Clients often say…“I’ll just pay off my collection and that will get my score back.” No. The scoring model looks at history too. Once you pay it off, it will remain on your credit report for quite some time.
The only way to keep your credit report clean is to be responsible and timely with your credit over the long term.
#3: “I have no credit cards and no debt. Why is my credit score not 850?”
We call this a Thin Credit File, which is little or no credit history. It’s important to rember that the scoring models look at credit behavior over time. So, no credit does not mean good credit. You have to build a track record of creditworthiness.
Stayed tuned for Part 3, where I will cover the tools and resources available to assit you with credit related issues! In the meantime, you can learn more about me by clicking here!