Click here for our What Not To do Handout for a more informaion!
Many people think that after they fill out the loan application and apply for a loan it’s all smooth sailing until the closing. For most people that assumption would be correct, however, more than one person has had the "breaks" put on their transaction by the missteps described below. If at all possible, please pay close attention to the following Do’s and Don’ts!
After you fill out your loan application, Mortgage Atlanta, with your permission will run a credit report for our underwriter. Every lender and loan program has different guidelines for us to follow. It is important that you not do anything that will have an adverse effect on your credit score while your loan is in process. We know it’s tempting…If you’re moving into a new home, you might be thinking about purchasing new appliances or furniture, but this is really not the right time to go shopping with your credit cards. You’ll want to remain in a stable position until the loan closes and give us the opportunity to help you lock in the best interest rate we can possibly get for you.
Here is a handy list of do’s and don’ts that you should adhere to after your loan application has been submitted to the lender.*
- DO NOT APPLY FOR NEW CREDIT OF ANY KIND – The temptation are strong, and there are always offers for the big purchase items that people want to make in connection with a move; JUST WAIT until after you close! If you receive invitations to apply for new lines of credit, don’t respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score. Likewise, don’t establish new lines of credit for furniture, appliances, computers, etc
- DO NOT MAX OUT OR OVER CHARGE EXISTING CREDIT CARDS –Increasing your balance on your credit cards is the fastest way to bring your score down, and it could drop up to 100 points overnight. Once you are engaged in the loan process, try to keep your credit card balances below 30% of the available credit limit.
- DO NOT PAY OFF COLLECTIONS OR CHARGE-OFFS *– I know this sounds strange but we have since thise one too many times! Once your loan application has been submitted, don’t pay off collections unless the lender specifically asks you to in order to secure the loan and we recommend that you do everything possible to negotiate deletion in exchange for payment. Generally, paying off old collections causes a drop in the credit score. (*We are not saying don’t pay your bills, we are just advising you that your score may drop if you change your credit profile during the loan process.)
- DO NOT CLOSE CREDIT CARD ACCOUNTS – Many people think that if you close an account it just simply goes away; not true! If you close a credit card account, it can affect your ratio of debt to available credit which has a 30% impact on your credit score, and also your length of credit history which has a 15% impact on your credit score. If you really want to close an account, do it after you close your mortgage loan.
- DO NOT CONSOLIDATE DEBT TO ONE OR TWO CARDS – Once again, we don’t want you to change your ratio of debt to available credit. Likewise, you want to keep beneficial credit history on the books.
- DO NOT RAISE RED FLAGS TO THE UNDERWRITER – Don’t co-sign on another person’s loan, or change your name and address. The less activity that occurs while your loan is in process, the better it is for you.
- DO STAY CURRENT ON EXISTING ACCOUNTS – Late payments on your existing mortgage, car payment, or anything else will be reported to the credit agencies and will cost you dearly. One 30-day late payment can cost anywhere from 50 to 80+ points on your credit score. If you think there is a chance you may miss a payment let your Loan officer!
- DO CALL YOUR LOAN CONSULTANT – If you receive notification from a collection agency or creditor that could potentially have an adverse effect on your credit score, call us so we can try to direct you to the right resources and prevent any derogatory reporting to credit bureaus.
* SOURCE: Based on The Top 10 Credit Do’s and Don’ts During the Loan Process, provided by Credit Resource Corp.