Credit Report Tips That Could Save You Thousands Of Dollars

Higher The Credit Score - Lower The Rate:

To a certain point this is true; the higher your credit score the lower your mortgage rate will be.

For Conforming mortgage loans a 740 or higher credit score will enable you to obtain the best possible interest. So even if you have a 800 credit score the improvement to your interest rate will top out at 740.

FHA home loans there really is no high credit score - lower rate link however you ideally would like to have a credit score above 580 when it comes to a FHA loan.

In this post I’ll provide information you can use to ensure your credit score is high so that your mortgage rate is low.

Credit Report Tips For A Higher Credit Score:

  1. When it comes to your credit cards; always keep your balances below 35% of your credit limit: Having a credit card balance above 35% could negatively affect your credit score if it becomes an on going occurrence. A few months above that level will probably have minimal to no affect on your credit score. If you go month after month at 50%, 60% or higher that starts to really bring down your credit score.

    And this is the most important thing for those that pay off/pay down their balance every month: Make that payment PRIOR to the last day of your bill cycle. Credit card provider report to the credit bureaus the balance listed on your statement.

    So if you have a credit card with a $5,000.00 limit and receive a bill for $4,750.00, the credit bureau receives that exact information and it appears to them you are maxing out your credit card (even if you pay the bill off in full by the due date).

  2. Number of open credit cards: Some people incorrectly think that if they have no credit cards they’ll have a great credit score.

    That is not true.

    In fact your credit score will be really low and if you’re trying to refinance your home you’ll rate will be higher then it needs to be. Why? Because for you to obtain a high credit score you need to show the credit bureaus that you can handle credit. If you have no open credit cards how do you expect to show that?

    Do you want to have ten open credit cards? Probably not.

    Ideally you should have two - four open credit cards with no balances above the 35% threshold.

  3. Credit Report Errors: If your name is spelled wrong, your home address is spelled wrong or any other basic factual information is wrong - correct that as soon as you can.

    If there are errors on your credit report such as missed payments you’ll want to correct them as soon as you can.

    But what about something that is 5-6 years old and you “think” is an error? Maybe it’s a small collection account or a missed payment on a credit card.

    You might be best to just leave it alone.

    Negative items like missed payments only stay on your credit report for seven years. Disputing something thats more than five years old will probably turn out to be a waste of time.

    Something that old is not hurting your credit score significantly and to remove it you’ll have to prove it was an error on the creditors part.

  4. Credit Report Inquiries: Most people think that every time you have a creditor check your credit your score drops dramatically. That simply is not true.

    Credit Bureau’s understand the importance of shopping around so when you look for a new mortgage or car loan; they take that into consideration. 

    Does that mean eight - ten companies can check your credit without your score going down a bit? No but three, four or five mortgage (or car) companies checking your credit will have very little to no affect on your credit score.

    With respect to credit cards it’s a bit different. Applying for five credit cards at once might bring your score down so when applying for a new card make sure that’s the one you want.

Good Credit Can Save You Money:

Having good credit can save you thousands of dollars when it comes to obtaining a mortgage. Use the above tips to get your credit score as high as possible.

FHA Home Loans

FHA Home Loans:

One of the most well known loan programs in the country is the FHA home loan program. The program started just after the great depression to enable more Americans to become homeowners. The National Housing Act of 1934 was the legislation that created the Federal Housing Authority (FHA).

After WW II the Federal Housing Authority was instrumental in assisting our veterans purchase homes as they returned from war.

Since 1934 the FHA home loan program has allowed over 40 million Americans to become homeowners and currently they have nearly eight million mortgages in their portfolio

FHA Home Loans For Purchase and Refinance Transactions:

A homebuyer or a current homeowner can obtain a FHA home loan. The program offers some unique features that make it standout amongst the other well known home loan programs. Mortgage rates for FHA home loans are generally lower than mortgage rates for Conforming loans however FHA home loans come with Mortgage Insurance (MI). 

What is Mortgage Insurance (MI)?

The first thing to understand when it comes to MI is that it's NOT your homeowners insurance. Homeowners insurance covers your home in case of fire or other disasters. 

It's also not your mortgage rate.

MI is an insurance policy that covers the lender for any losses in case you default on your mortgage. There is an up-front fee (that you pay at closing or it's rolled into the interest rate) and then you pay monthly with your mortgage payment.

FHA Loans To Buy A Home:

There are two great things about the FHA Home Loan program when you're buying a home:

  • Low down payment (3.5% of the purchase price)
  • Poor to Average credit is ok

If you have a 630 credit score and you want to buy a home for $200,000 then you only need $7,000 for a down payment to open the door to getting qualified under the FHA program.

You also need the obvious; employment and enough income to be able to afford the monthly payments.

FHA Streamline Refinance Program:

If you currently have a FHA home loan you are in luck. You have access to one of the best refinance programs in the country (provided you meet the basic qualifications). The main requirement is that your current loan is a FHA loan.

Benefits of the program:

  • No appraisal
  • No income documentation
  • Very fast closing

Who Should Consider the FHA Home Loan Program:

If you have a small down payment (or little equity) and/or less than perfect credit you may want to consider the FHA home loan program. If you have a big down payment and/or great credit the FHA home loan program may not be for you. 

When contacting a Loan Officer be sure to ask plenty of questions so that you are fully informed about your mortgage options.