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Discussions tagged with 'credit scores'
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Good afternoon, folks. Gustan asked me to explain about Credit, Credit Scores, Credit Payment History, and The Importance of Credit when you are originating a loan. Credit is, hands down, one of the most, if not the most important factor when you are qualifying and pre-approving a mortgage loan applicant. There is no uniform credit score and credit history that is set on getting approved for a mortgage. Every mortgage loan program has its own credit score guidelines and requirements, as well as specific credit requirements.
For example, let’s go over some case scenarios:
- HUD, the parent of FHA loans, requires a minimum of a 580-credit score for a borrower to qualify for a 3.5% down payment home purchase FHA loan.
- Borrowers with credit scores under 580 and down to 500 FICO are eligible to qualify and get approved for an FHA loan.
- However, per HUD guidelines, anyone with credit scores under 580 credit scores require a 10% down payment vs a 3.5% down payment. Fannie Mae and Freddie Mac require a 620-credit score for borrowers on conventional loans.
- The Department of Veterans Affairs has no minimum credit score requirements on VA loans.
- However, most lenders have lender overlays (WE WILL COVER LENDER OVERLAYS ON A SEPARATE MODULE ON MLO TRAINING e-Learning Module).
- Lender overlays are mortgage requirements set by individual lenders that is above and beyond the minimum agency mortgage guidelines of HUD, VA, USDA, Fannie Mae, and Freddie Mac.
- Non-QM loans, jumbo loans, and alternative lending options are portfolio loans, and the minimum credit score requirements is created and set by its individual lenders.
How Is Credit Pulled by Mortgage Lenders and How is the Qualifying Credit Score for a Mortgage Determined Credit Scores Determine the Following: All mortgage lenders of government-backed and conventional loans pulls a tri-merger credit report. A tri-merger credit report is when a credit reporting service such as Credit Plus, Advantage Credit, or CIC pulls a credit report from Equifax, Transunion, and Experian simultaneously. Each credit bureau has its own credit score for the mortgage loan applicant. The lender is required to use the middle credit score as the qualifying credit score. Tri-merger credit reports and its credit scores are good for 120 days from the date it was initially pulled. If the mortgage process lasts longer than 120 days, the mortgage loan originator is required to re-pull a new tri-merger credit report because the initial tri-merger credit report is null and void. There are times where MLOs will re-pull a tri-merger credit report before the 120 day expiration date during the mortgage process if the MLO is confident the borrower’s credit scores has gone up. The reason they do a hard-inquiry tri-merger repull is because the MLO is hoping for a higher credit score where it benetits the borrower with a lower rate. This is normally done before the loan officer locks the mortgage rate.
- Credit scores determine whether or not borrowers qualify for a mortgage loan program
- Credit scores determine pricing on mortgage rates
- Credit scores determine pricing on private mortgage insurance on conventional loans
Credit Reports Determine the Following:
- The borrower’s credit payment history is stated on credit reports (current, 30, 60, 90, 120 days late).
- Derogatory credit tradelines such as late payments, accounts in collections, account that has been charged off, repossession, and other derogatory credit payment history and status.
Public Records:
- Any public records will appear on credit reports.
Example of Public Records Include the Following:
- Type of bankruptcy, housing event (foreclosure, deed-in-lieu of foreclosure, short-sale, forbearance)
- Judgments
- Tax lien
- Other public records
National Third-Party Public Records Search
- All mortgage lenders does a national third-party public records search during the mortgage process.
- Any public records that is not reflected on the consumer credit reports needs to get disclosed by the mortgage loan applicant because it will get discovered.
- Not disclosing it to the MLO and/or lender can cause delays in the mortgage process or can cause a last-minute mortgage loan denial.
The borrower’s personal and personal information is posted on credit reports.
The mortgage loan applicant’s full name, legal name, AKAs, DOB, current and previous addresses, current and previous employers.
The mortgage loan applicant’s full name, legal name, AKAs, DOB, current and previous addresses, current and previous employers.
List of Credit Tradelines
- which are creditors and includes type of credit such as auto, mortgage, installment account or revolving account
- date opened, payment history
- date of last activity
- amount borrowed and loan
- credit limit, balance
- late payment history, current standing
Credit Disputes on Derogatory Credit Tradelines
You will also find derogatory credit tradelines that is being dispute with the verbiage consumer disputes this credit tradeline. Credit disputes are not allowed on the following types of credit tradelines:
- Derogatory credit tradelines such as late payments
- Non-medical collection accounts
- Charged-off accounts
- Public records such as bankruptcy, foreclosure, deed-in-lieu of foreclosure, and short-sale
- Judgments
- Tax-liens
Credit Disputes are Allowed on the Following Types of Credit Tradelines
- Medical collection accounts
- The sum of all non-medical collection accounts with the aggregate outstanding balance that is less than $1,000 dollars.
- Non-medical collection accounts with zero balance, which means the non-medical collection account has been paid off.
- Non-medical collection accounts and credit tradelines has seasoned longer than 24 months (Be careful on this exemption and check with the underwriter of the wholesale lender because many lenders will still require you remove all credit disputes.
Why Credit Disputes Are Not Allowed By Mortgage Lenders
The main reason why credit disputes are not allowed during the mortgage process is because of the following:
- Whenever a consumer initiates a credit dispute on a derogatory credit tradelines, the algorithm on the credit scoring system of Experian, Equifax, and Transunion automatically discounts the disputed credit tradeline from its credit scoring model.
- What this means is that each of the three credit bureaus will discount and NOT count the derogatory credit tradeline from the consumer’s credit scores.
- Since the derogatory credit tradeline is not counted on the overall consumer credit score, the consumer credit scores will increase.
- Every credit dispute on derogatory credit tradelines will trigger a higher credit score.
- Therefore, under the lender’s point of view, a credit report with credit disputes renders an inaccurate credit score.
- On the flipside, if you do a credit dispute on medical collections and/or exempt credit tradelines, you can increase your credit scores and get away with it.
Bi-Merge vs. Tri-Merge Credit Report – Advantage Credit
advcredit.com
Bi-Merge vs. Tri-Merge Credit Report – Advantage Credit
Bi-Merge vs. Tri-Merge Credit Report – Advantage Credit
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replied 1 week, 2 days ago
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Hi, I know that 740 FICO is the minimum requirement for Up to $120K credit card based on the lending network website.
Should I increase my credit first or is there a different program for me?Thank you
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replied 1 year, 6 months ago
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17 Replies
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Many people use Credit Karma to check their credit scores. However, when they begin working with a lender, they find out their scores are lower.
Is Credit Karma accurate?
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This discussion was modified 3 years, 3 months ago by
Eric Jeanette.
View Last Reply: replied 1 year, 7 months ago
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This discussion was modified 3 years, 3 months ago by
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Which of the Following Statements are True About Credit Scores?
A. Your credit scores tell creditors whether you are more or less of a risk
B. When applying for a mortgage, credit scores have a huge impact on what your interest rate will be
C. It is possible to improve your credit without paying for credit repair.
D. All of the above
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This discussion was modified 3 years, 3 months ago by Eric Jeanette.
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This discussion was modified 3 years, 3 months ago by Eric Jeanette.
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This discussion was modified 3 years, 3 months ago by Eric Jeanette.
View Last Reply: replied 1 year, 7 months ago
| Participants: 3 Members
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2 Replies
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This discussion was modified 3 years, 3 months ago by
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Where do I check my credit scores for free to see if i qualify for a house. How do i check my credit score to buy a house. What is the minimum credit score to buy a house.
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replied 1 year, 9 months ago
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1 Reply
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Veterans and Credit Utilization: Balancing the Scales of Debt and Limits
Welcome to Day 16 of our series, tailored specifically for our brave veterans navigating the realm of civilian credit. Today, we hone in on the topic of credit utilization, a pivotal element in credit scoring and one that can greatly influence financial health.
Credit Utilization Unpacked: Understanding the Ratio
Credit utilization is the ratio of your current credit card balances compared to your credit card limits. Expressed as a percentage, it’s a significant factor, accounting for about 30% of your FICO score. A lower percentage indicates responsible credit management, signaling less risk to lenders.
The Significance of Credit Utilization for Veterans
Just as discipline and balance are essential on the battlefield, they’re crucial in financial matters too. Veterans transitioning to civilian life might encounter various financial responsibilities, making it vital to manage credit utilization prudently.
Effective Strategies to Optimize Credit Utilization
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Monitor Balances Regularly: Regularly check your credit card balances to ensure you’re not inching close to your limit.
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Increase Credit Limits: If possible, request a credit limit increase on your cards. This can lower your utilization without reducing debt.
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Multiple Payments: Consider making multiple smaller payments throughout the month to keep balances low.
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Keep Zero-Balance Accounts Open: Even if you’ve paid off a credit card, consider keeping it open. The available credit helps lower your overall utilization.
Veteran-Centric Insights on Credit Utilization
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Financial Re-adjustments Post-Deployment: After deployments, there might be significant expenses. Prioritize paying down high credit balances to keep utilization low.
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Veteran Aid and Financial Counseling: Some veteran associations offer financial counseling. Leverage these resources to get personalized advice on managing credit utilization.
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Benefit from Military APR Benefits: The SCRA offers reduced interest rates for active-duty military members. By capitalizing on this, veterans can potentially lower their card balances faster.
Challenges in Maintaining Optimal Credit Utilization
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Unexpected Expenditures: Life can throw curveballs, leading to unforeseen expenses. Having an emergency fund can mitigate resorting to maxing out credit cards.
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Misunderstanding Utilization: Some might believe it’s beneficial to use up their entire credit limit and pay it off monthly. However, high utilization, even if paid off every month, can affect your score.
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Over-relying on a Single Card: Spreading expenses across cards (without accumulating excessive debt) can help manage utilization on any single card.
Broadening the Horizon: Utilization in the Financial Mosaic
While credit utilization is a significant metric, it’s essential to see it as part of a broader financial narrative. Effective credit management encompasses punctual payments, diversified credit mix, and a keen understanding of one’s financial needs and capabilities.
Concluding Day 16: Balancing the Financial Scales with Precision
The art of managing credit utilization is akin to balancing scales. On one side, we have the credit we use, and on the other, the limits set by lenders. For our veterans, this balance is an integral aspect of their post-service financial journey, demanding the same precision and strategy they’ve exemplified in their service.
As we draw the curtains on today’s insights, our mission remains unchanged: to empower our veterans with the knowledge and tools to navigate the financial waters with confidence and clarity.
Join us for Day 17, as we delve deeper into the tapestry of credit, ensuring that our nation’s heroes are well-equipped for every financial challenge and opportunity that lies ahead.
View Last Reply: replied 1 year, 10 months ago
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Boosting your credit score typically involves adding positive credit tradelines to your credit report. Credit tradelines are accounts or credit lines that appear on your credit report and can impact your credit score. Here are some types of credit tradelines that can be used to boost your credit:
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Credit Cards: Having a credit card with a good payment history can positively impact your credit score. If you have a low credit limit or no credit cards, consider getting a secured credit card or becoming an authorized user on someone else’s credit card account.
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Installment Loans: Installment loans, such as auto loans or personal loans, can contribute positively to your credit score if you make on-time payments. These loans show that you can manage different types of credit.
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Mortgages: A mortgage loan can also have a positive impact on your credit score if you make regular payments. Having a mix of credit types, including both revolving (credit cards) and installment (mortgage) accounts, can be beneficial for your credit score.
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Retail Store Cards: Some retail stores offer credit cards that you can use exclusively at their stores. These can be easier to qualify for and can help establish or improve your credit history if used responsibly.
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Secured Credit Cards: Secured credit cards require a security deposit, making them easier to obtain for individuals with poor or limited credit history. Using a secured card responsibly can help you build or rebuild your credit.
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Authorized User Accounts: Becoming an authorized user on someone else’s credit card can allow you to benefit from their positive payment history. However, this strategy may not work with all credit scoring models, and you should ensure that the primary cardholder has good credit habits.
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Credit Builder Loans: Some financial institutions offer credit builder loans specifically designed to help people establish or improve their credit. These loans often involve making small, regular payments into a savings account, and once the loan is paid off, you receive the funds.
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Peer-to-Peer Loans: Peer-to-peer lending platforms may offer loans to individuals with varying credit profiles. These loans can help you build credit if you make timely payments.
When using these credit tradelines to boost your credit, it’s essential to make all payments on time, keep your credit card balances low (ideally below 30% of the credit limit), and avoid opening too many new accounts at once, as each credit inquiry can temporarily lower your score. Additionally, time is a crucial factor in improving credit, so be patient and consistent in your efforts. Angela Roque hopefully will add her affiliate links to Gustan Cho Associates so our loan officers can get access to the credit affiliates to help our borrowers boost their credit score under a one stop shop.
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replied 1 year, 11 months ago
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Here is an informative article on how mortgage lenders price mortgage rates based on credit scores.
https://www.gcamortgage.com/mortgage-rates-versus-credit-scores/
gcamortgage.com
How Lenders Price Mortgage Rates Versus Credit Scores
The way lenders price mortgage rates versus credit scores is the lower the credit scores, the higher the mortgage rates due to risk for the lender
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replied 1 year, 11 months ago
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2 Replies
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Credit Karma is not accurate for mortgage credit scores but it is a great indicator. If Credit Karma is high, so will your mortgage credit scores. The mortgage credit scores are generally lower than Credit Karma.Creidt Karma is easy to use and you get Transunion and Equifax but not Experian.
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replied 1 year, 12 months ago
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