We are quickly approaching the home buying and selling time of the year. The spring and summer months are a popular time for home purchases, while the winter months are much slower.

As we get closer, there is no better time to take a closer look at your credit and work to improve your scores. Many people do not realize the impact of what seems to be a minor issue until it is too late. Preparing credit for a real estate purchase in advance could save buyers hundreds of thousands of dollars. Closing an old account, having one small debt late payment on a credit card, or delaying to pay a medical debt can ultimately decrease credit scores hindering the success of reaching financing goals.

One important step for consumers is to check their FICO scores at least six months to a year before applying for a loan. Buying credit scores direct is easy and does not hurt credit scores at all. Also, consumers must be sure to buy the “right” credit score. They can purchase their FICO mortgage scores at half price by using the FICO 3B Monitoring product and then cancelling once the purchase is done. Once the scores are pulled make sure to find the score that says “mortgage lending” since they will provide you with many different versions.  If the “mortgage lending” version is under a 740 it is time to get some advice. Usually the FICO score report will give an indication of what factor within the credit is causing the lowered score.

If any of these categories are marked less than “Great” there is room for improvement:

1. Pattern of payment history
2. Amount of debt
3. Length of credit history
4. Amount of new credit

After reviewing your credit scores and reports, keep an eye out for factors that can hurt your scores:

1. If you have poor credit due to delinquencies make sure to get the help of an excellent credit repair company immediately. The sooner they can help you the faster your chances of having a successful closing.
2. Keep your balances on credit cards low, ideally 7 to 10% of the limit, balances higher than that can decrease scores.The closer the aggregate and individual account balances are to aggregate and individual limits the more the score drops.
3. Keep credit card balances low two months prior to applying for financing since creditors do not always update the balance pay off immediately. Consumers should also make sure to keep whatever balances they do have to a limited amount of credit card accounts.
4. Closing and opening credit can drop scores so avoid these two actions unless told otherwise by your mortgage or credit professional.
5. Do not have excessive third parties reviews of your credit in one year since this is considered an extreme amount of inquiries and can cause scores to drop 20-40 points.
6. Do not co-sign for any credit unless you are in control of making the payments since one new late payment can drop scores hundreds of points.

Some tips for consumers who have had late payments in the last year.

If you know you were late on a mortgage in the past 12 months do not call the lender and try to convince them to remove the late payments with no knowledge of consequence or what should and should not be said.

2. Speaking with a credit expert to evaluate the potential success of removing late payments from credit can give great insight into what the best next step should be.
3. Do not open or close any credit without understanding your short and long term finance goals first.
4. Credit activity must be used with strategy for attaining future goals.
5. No credit situation is hopeless since credit will improve as time goes by, unless of course you continue to be late.
6. Credit law states that creditors have the right to keep negative credit on profiles for 7-10 years but that does not mean that they must.

Feel free to reach out to us for a credit review. Even if there is nothing to fix we would be happy to give those with a 740 or less a quick free review and offer them tips on how they may increase their credit scores before handing in the mortgage application.