February 18, 2014 4:50 pm
When talking to a bank, a loan officer, and yes, even a car sales person, the first thing they want to know is your credit score. They do this by 'pulling' your credit report. There are 3 credit agencies (Equifax, Experian, and Transunion) who collect information from credit card companies, stores giving store credit and any lending institute (ex. car loan, student loan). On your credit report they can see your habits repaying your debts. The better your habits the faster you can move through the mortgage application and underwriting process.
Today, Bobby Wesley loan officer with Starkey Mortgage visited Maximum One's East Cobb office to highlight the importance of credit scores for prospecting home buyers.
· Outstanding balances may impact your credit score by 30%. Paying off your balances on a monthly basis is therefore a smart idea. Also, using the maximum credit allowed will have a negative effect.
· Payment history has a 35% impact. Paying your debts on time and in full will raise your credit score while late payments may put a blemish on it, particularly if done on a regular basis.
· Credit history, meaning how long you have a certain credit line, has a 15% impact. The best advice here is to keep your oldest credit cards and to avoid acquiring new credit cards. I’d like to add have only one or two credit cards. If you have more cards, then use them once or twice a year and for the rest of the year put them in the freezer where you cannot get to so easily.
· Type of credit has 10% impact. Having a mix of car, student, and credit cards is better than credit cards only.
· Inquiries have a 10% impact. It goes without saying that while shopping for a mortgage or a car you’ll be talking to several different people. A rule exists that 20 inquiries in a 14 day period will be treated as only 1 inquiry. Hard inquiries can cost 2 to 50 points on a credit score.
If you are thinking about buying a home soon I strongly recommend talking to a loan officer before hitting the road in search of a home. He/she will tell you how much home you can afford which will help narrowing the search. Your Realtor will be grateful that you have this Pre-Qualification letter in your pocket and the seller will know you are a serious buyer when he sees your offer accompanied by such a letter. Better yet, ask your loan officer for a Pre-Approval letter which requires income verification.
Having said this, there’s little point in starting this process as early as 6 months in advance because life (and the lending industry) is always evolving and changing.
If you have further questions regarding credit scores and mortgages, give Bobby a call at 404-510-6179, he’ll gladly assist you.