The first element looked at in any loan application for a home loan in Sonoma County is going to be your credit history. How have you paid your bills? Do you pay them faithfully on time? Or do you tend to drag them out and juggle payments with the occasioanl slip up every once in a while? Or have you had a major life changing event occur in your life recently that has forced you to miss payments alltogether.
At the beginning of every loan application, we “pull” your credit report. We use three different companies called repositories that report your credit and assign you a FICO score. These scores can differ by as much
as 100 points. They digest the information they have been given by the creditors and assign a credit risk score to the borrower. If one company has more missed payements or derogatory entries for what ever reason then the score will be lower than the other company. That is why we use three different scores and only use the middle one, tossing out the high and the low. If you are married or a partner in transaction we will use the lower of the two middle scores as the primary credit score.
There is a lot that goes into why credit scores go up and down and it used to be a big secret but every credit report now provides the consumer with the reasoning behind the score as well as provides the creditors contact information. A couple of the more common reasons behind credit scores being effected aside fom the obvious missing of payments are as follows.
Too many inquiries; This is probably the biggest reason borrowers scores come down. They are shopping around for the best rates (and I have already told you you no one gets the best mortgage rate) and along the way their credit is pulled time and again and each inquiry can result in a 5 point drop or more in score. This is sometimes easily explained but can drop you in to an area that will put your mortgage application at risk.
Credit Balances too high: If you have credit cards and you carry a balance that is higher than 50% of the total available credit then your score will be dinged. Balances that are close to 100% max will be severely hit.
Too many open accounts: Pretty obvious…
Lenght of time accounts have been established: again pretty obvious.
There are many more and certainly knowing your credit score is just the beginning of understanding this key component to obtaining a home mortgage. Give me a call or email me and I can help you get a handle on your credit. 707-431-9715…hunt@prospectmtg.com
