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Credit Scores

Higher credit scores result in more qualified buyers

Buyers with higher credit scores will significantly increase their chances of loan approval.

Why scores typically go down

Primary reasons include payments being more than 30 days late; collections; high balances on revolving accounts (such as credit cards and line of credits); recent accounts that have been open for too short of time; and too many accounts with outstanding balances.

Additional reasons are number of inquiries (how many times your credit is checked) as well as bankruptcies, foreclosures and tax liens.

To improve credit scores:

  • Check your credit report for errors. If there are errors, you can dispute them with the 3 credit reporting agencies.
  • For revolving accounts such as credit cards, only charge up to 39% of your available limit. Charging higher than this will significantly lower your scores. If you need to charge a large amount, increase your limit.
  • It is difficult to approve an applicant with no credit. If you have a client with no credit, then have them establish credit ASAP.
  • Establish credit for a long time. Your scores will go up as your accounts get older. Do not transfer your balance to a new credit card every six months.
  • Limit the number of credit cards you carry. Too many credit cards will lower your score. Have at least one credit card (preferably two) but no more than three.
  • When a company checks your credit it is an “inquiry”. Inquiries will lower your credit score. Therefore, if a client is shopping among many mortgage companies, and allows all of them to pull credit, then their credit score will decrease.

Correcting Credit Report Errors:

Your credit report may have errors such as a late pays, collections, judgements, etc. These errors may lower your score enough to prevent you from qualifying for a mortgage or cause you to only qualify for a high-rate mortgage. Therefore, if you find an error and that makes your scores significantly low, then dispute it ASAP.

Mail a dispute letter to the 3 credit reporting agencies. Include any account numbers and documentation of proof that it was an error. You may be able to get a letter from the company that reported the late pay or collection stating that they made a mistake. If you obtain this, then send it with the dispute letter. You also may send a copy of the page of the credit report that shows the error. Another option is to dispute online. It is important that disputes are made and resolved prior to when a client wants to buy a home. Disputes during the mortgage approval process may cause problems during the underwriting process. See below for contact info.

Equifax 800-685-1111
P.O. Box 740241
Atlanta, GA 30374

Trans Union 866-887-2673
P.O. Box 1000
Chester, PA 19022

Experian 888-397-3742
701 Experian Parkway
Allen, TX 75013

(502) 896-2616