Credit Score

How to Correct or Improve Your Credit Score

posted in: Mortgages

One of the major hurdles many consumers will find themselves in if they haven’t already is the erosion of their credit scores. This is largely due to the COVID-19 pandemic. With the loss of jobs and income, unfortunately, this problem, which has become endemic, will persist for the foreseeable future. So, what can YOU as a consumer do to remedy this problem? First of all, there is no quick fix to this problem because it could take anywhere from 30 to 90 days for your credit score to go up and then be reflected by Trans-Union, Experian, and Equifax. This has been a perennial problem for many years. Plan on a long-term, ongoing fix to the credit report. The loan officers at 7th Level Mortgage can best help you with the mechanics of the creditors’ name, address, and account numbers, especially if the account is in collections.

Correct Errors on your Credit Report: You are entitled to a copy of your credit report once a year under the Fair Credit Reporting Act. If you are unemployed and intend to apply for employment in the next 60 days, are receiving public assistance and if you believe there is fraud on your credit file the report will be free. Additionally, if you have been the subject of an adverse action, such as denial of credit or insurance in the last 60 days or you have placed a fraud alert on your credit reports, the report(s) is/are free as well. The loan officer at 7th Level Mortgage can guide you through all the steps as to how to get these errors corrected. What do I do if I am in the middle of applying for a mortgage and my scores are going down? Ask about rapid re-score.

Pay your Creditors on Time, EVERY TIME: The credit report and scores are based on a weighted system. This means that there is more weight given to mortgage payments and rent than there is to a Valero Gas Card. Mortgages and rents amount to approximately 35% of your score, so single 30-day lateness could equal 100 points. Unfortunately, latenesses will stay on your report for up to 7 years. Barring a valid reason for being late on these payments (medical emergency, death of a spouse), all you can do is pay your bills on time, every time. Time is a great healer, so if you had a late mortgage payment last month, the lateness will impact your credit score more than if the lateness occurred 1 year ago.

Pay Down your Debt: Another 30% of your credit score is attributable to debt accounts like credit cards. My first recommendation is to STOP USING THEM. What happens is that as your credit is used, your monthly payment on the card goes up and two things help lower your score. First of all, your credit utilization has gone UP and your score is reduced and secondly, your debt to income ratio will go up as well. Higher debt to income ratios equal risk to every mortgage lender.

If you can, pay off the credit cards you have. You need not close the account, though because by leaving the account open you are demonstrating control of your debts. That lowers the risk to the mortgage company and increases your chances of approval. Even though medical debts that are in collection hurt your score, it may not be possible to pay off those debts all at once. I suggest entering into a repayment agreement with the collection agency. The very same applies to student loan debt. Paying off student loan debt won’t help your score, BUT, it will improve your debt to income ratios. Consider consolidating your credit card debts into a single payment because this will bring down your ratios by doing balance transfers to t the best credit card in terms of interest rate.

STOP!: Stop applying for credit cards. Every time an inquiry for credit cards is on your credit file, the inquiry itself can lower your credit score. The only exception to this is home loans, car loans, and student loans.

Control your Credit Utilization Score: Try your best to pay off your balances once a month. This particular core shows how much credit you are using per monthly billing cycle. 7th Level Mortgage loan officers can even explain to you how to best accomplish this. The ratio to shoot for is under 30%. Even though you may have a high credit limit available, it doesn’t make sense to “max it out”, month in and month out.

7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with each mortgage transaction phase. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.