What Do Mortgage Lenders See When They Look at You? (part 2)

What Do Mortgage Lenders See When They Look at You? (part 2)

This week in our series of discussions on how lenders look at you we will talk a little bit about your credit rating. Most people know, generally, what their credit is like. If you have never been late on a bill in your life, have had a few car loans, a couple of mortgages, and pay your credit card balances off every month, you probably have jam-up credit, with a credit score in the 700+ range. These are the people who actually get the incredibly low rates car dealers advertise on the radio, and who get the best available rates on their mortgage loans. In short, their whole life is a few percent less expensive than those with lower credit ratings.

Then there are those whose credit ratings, for whatever reasons, have gotten beaten up over the years. Late payments on loans and credit cards (for the purposes of your credit, "late" is anything over thirty days past the due date), car repossessions, unpaid student loans, judgements, all these things negatively impact your credit score, especially if you don't have a lot of accounts in good standing to offset the negative stuff. Generally, once your credit score drifts below 660 things get challenging, and below 600 you are going to find it tough going to get a mortgage loan unless you have a substantial down payment.

Then there is everyone else who falls somewhere between, those with credit ratings between 600 and 700. This is where you need an experienced mortgage professional, who can either get you into a decent mortgage loan or tell you what you need to do in order to get your credit rating up to the level it needs to be to get a decent loan.

Credit profiles are like health profiles, every one is different, and the remedies prescribed are most effectively done on an individual basis, but here are a few things that everyone can do to improve their scores:

 * If you are behind on any loans or credit cards, get current and stay current. Late payments (over thirty days) are murder on your scores.

* If you have credit cards that carry balances, try to keep the balance at 50% or less of the total credit limit. You want to avoid the "tapped out" look.

* Settle disputes with creditors before they are late or written off as bad debts. The car you bought on credit may be a lemon, but the firm that lent you the money to buy the lemon still wants their money back, not the car.

* If you have a judgement against you for an unpaid debt, try to make arrangements to settle the debt, even if it is small monthly payments. Then make the payments on time.

* If you have no credit or bad credit in the past, get started again with a secured credit card.

These are just a few general things, like quitting smoking is good general health advice for everyone. Your mortgage person should help you map out a strategy to get where you need to be to get the mortgage loan that is right for you.