CREDIT DO’S AND DON’TS FOR THE DURATION OF THE LOAN PROCESS IN ALBUQUERQUE REAL ESTATE MARKET
written by Leigh-Anne Osten, Mortgage Loan Officer with Bank of Albuquerque.
It is critical to have good credit when it comes to obtaining lower interest rates and terms for a mortgage. It is also very important that you protect your credit during this time as well. Especially with how competitive the Albuquerque Real Estate Market has been this year, you’ll need to gear up with you Albuquerque Realtor and Loan Officer as soon as you can.
I have listed a few credit do’s and don’ts to help when you are or start planning to be in the market for a new property.
- Do remain current on all existing credit accounts-One late notice could end up costing you.
- Do continue to use your credit (somewhat normal)-Changing your pattern or completely stopping the usage of credit could actually lower your score.
- Do reach out to your mortgage professional when in doubt.-Check before making any changes such as closing out Credit Cards and accounts, changing your addresses, etc.
- Don’t apply for new credit-This happens a lot. We all want the best deal and we are shopping rates, please note that each time an application is put in that your credit is being ran again and in some cases, multiple times by the same lender. It is best to get a verbal rate and then proceed if you are serious about using that lender. Also, do not apply for new credit such as autos or furniture during this time. It is VERY important that you wait until the loan is completely closed before doing so. If one were to obtain new credit and incur a balance, this could cause their DTI (debt-to-income) to raise and may result in the loan being denied.
- Don’t max out credit cards-it is a good rule of thumb to keep your credit card balances at 30% or below of the available credit limit. If possible, it is good to do this on all of your credit cards.
- Don’t consolidate your debt-when you consolidate all of your debts onto 1 or 2 credit cards, it makes it appear that the credit cards are maxed out which can cause a penalty in your credit scores.
- Don’t close credit card accounts-If you were to close a credit account, it may appear that your debt ratio has increased. Closing a card will affect other factors in your score including credit history. If closing an account is a must, make sure that you are not closing it during the loan process. In many cases, the older the credit account, the more history and value to your credit score it may have.
- Don’t pay off collections or “charge offs”-If you wish to pay off old accounts, try to do it after the loan is closed. Make sure that you request a letter of deletion from the creditor. Contrary to popular belief, people will go to pay off old debts with the intent that it will be removed from the credit report. In many cases, it is not deleted, just updated stating that it was paid. Make sure that you follow through the process of getting it entirely removed.
Credit is important not only to the loan process but also to many things in life. The better your credit, the more favorable options you may have for purchases, rates, and more. Credit can also be looked at for other purposes such as employment. The bottom line is that credit matters for most of us. Make it a practice to keep it on your radar and know your exact situation. Your credit can change quickly and is updated each month so it is ever-changing. Please contact me with any questions, I am happy to assist!