Last week I had a past client that wanted to do an FHA Streamline refinance. Her credit score was just below the FHA Streamline guideline. We took a look at her credit report and she had a credit card with a balance of $2400 and a credit limit of $2500. By paying that card down to $500 she increased her credit score 44 points and therefore qualified for the FHA Streamline!
This is just one example that will improve your credit scores. Not only does having good credit scores help you get a mortgage but it also has a bearing on what rate you will get on that mortgage. Fannie Mae, Freddie Mac, FHA, and VA loans are all priced according to credit scores. The higher your scores, the better your rate. So, it’s not only important to let your clients know that high credit scores are will save them money, but it’s also important that you let them know how to improve their scores. Below are the biggest factors in helping increase your scores. Share this with your clients:
1) Obviously, make sure you are never over 30 days late on any accounts.
2) Keep your credit card balances at 30% or lower of the credit limit.
3) Do not let anybody check your credit unless you have to. During the mortgage process you will get an unlimited number of pulls within a 45 day period that will not hurt your scores. But if a credit report is pulled on the 46th day your score will drop.
Lastly, if you do not have any credit scores at all then go open a few credit cards, use them, and pay off monthly. Not having scores at all can keep you from getting a mortgage. FHA has a program that allows no scores but Fannie and Freddie do not.