Dos and Don'ts During the Loan Process
Sorry. I know we don't like to be told what to and not to do, but it's in your best interests...
When you fill out a loan appliaction, a credit report is run for the underwriter of the loan. Each lender has different guidelines and programs to follow. You should not do anthing that would have an adverse affect on your credit score while your loan is in process. You need to remain in a stable position until the loan closes for the best interest rates as possible.
Here is a list of dos and don'ts that you should adhere to after your loan application has been submitted to the lender.
Don't apply for a new credit card of any kind
I know you can save an additional 10% at JCPenny is you apply for a credit card (I know I have...), but that would not be the best course of action at this point. By applying for another credit card, that company will pull your credit report, causing an adverse effect on your credit score. Also, don't establish new lines of credit for furniture, computers, etc.
Don't pay off collections or charge-offs
Don't pay off colections unless your lender specifically asks you to do so. Generally, paying off old collections causes a drop in the credit score. The lender usually looks at only the last two years of activity.
Don't close credit card accounts
If you close a credit card account, it can affect your ratio of debt to available credit. This has a 30% impact on your credit score and is heavily looked at by lenders. If you really want to close an account, wait until after you close your mortgage loan.
Don't max out or over charge existing credit cards
Running up your credit cards is the fastest way to bring your score down. Once you are started in the loan process, (actually - and after that as well to keep your credit score high) try to keep your credit cards below 30% of the available credit limit.
Don't consolidate debt to one or two cards
Again, this will alter your raio of debt to available credit. Plus doing so will have an inverse effect on your payment history. You want to have a beneficial history of on time payments.
Don't raise red flags to the underwriter
Don't so-sign for another person's loan or change your name and address. Get this stuff fixed before or after the process. The less activity that occurs during the process, the better it will be for you.
Do join a credit watch program
Your bank, credit union, or credit card company may be able to provide a free program to you that alerts you to any changes on your credit report. This will alert you to any problems that you can fix before the underwriter.
Do stay current on existing accounts
Late payments just aren't a good thing. Keep your payments up to date - one 30 day late payment can cost anywhere from 30 to 75 points on your credit score.
Do continue using credit as you normally would
Don't think that you should stop all purchases and all automatic payments - continue to use your cards as normal. If it appears you are diverting from your original spending patterns, it could cause your score to go down. If you have a monthly service for internet access billed to the same credit card for the past number of years, there's no reason to drop it now.
Do call your loan consultant
If you recieve notification from a collection agency or creditor that could potentially have an adverse effect on your credit score. If you have any questions about what you should or should not do during the loan process, talk to your mortgage professional.
Based on The Top 10 Credit Dos and Don'ts During the Loan Process provided by Credit Resource Corp. www.creditresourcecorp.com
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