When it comes to purchasing home loans, the main question that many people have before initiating the process is, “How is my credit?” Before mortgaging a loan, lenders need to be assured that they will receive an adequate return from their investment before financing a home. With our most recent financial crisis, many people became concerned about mortgages, worried that their current credit score will deter on their dreams of purchasing or refinancing their home. Because of this, there are always certain tricks, or in further perspective, general practices that must be exemplified in order to maintain a great credit score.
Ideally, banks and lenders love a credit score that ranges around 760. With this score, many banks give customers eligibility to their maximum loan programs. This does not mean people cannot achieve higher credit scores ranging in the 800s, but by most judgments, having a score of 760 will grant you the same program eligibility that those with higher scores are eligible for.
Nevertheless, the problem that looms the mortgage industry today is that most Americans do not have that attractive looking score of 760. In fact, approximately 62.8% of people have scores below 750 based on a recent poll conducted in 2014.
Due to this astonishingly high percentile, everyone is now starting to realize the importance of increasing credit scores with goals of increasing their home loan eligibility. Here are common, practices that people can do to increase these scores:
- Analyze current score
- If errors are found, you have the right to dispute objections to proper authority!
- Lower your overall debt load
- You do not have to pay these collections in full, but deplete these amounts as much as you can!
- Pay your bills on time
- Set up reminders with the help of your bank!
- Minimize the amount of collections
- The more credit cards you have, the lower your score will be!
When mortgaging, banks heavily rely on credit scores when deriving what loan program, if any, works for their customers. Using a process called Mid-Score, banks take the middle ranked credit score from these three sources: Equifax, Transunion, and Experian. However, if you are married, they take the LOWER mid-score of the couple. This process allows banks to curate a program that fits your credit derived lifestyle. Because of this, it is strongly suggested to check your credit score consistently using these three secure domains, allowing you to see exactly what the bank will see!
At Creekside mortgage, we specialize in VA Loans. Although credit checks with these types of loans are not always mandatory, we strongly encourage all potential homeowners to be mindful of their credit scores because having more options means you will have better rates!