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Credit Repair For Your Mortgage

Aug 12, 2008
Every Point Counts

Do you plan to purchase a home or refinance your mortgage anytime soon? You better make sure your credit score is as good as it can be. A leading credit repair expert offers some powerful tips on improving your credit score and getting the best mortgage rate possible.

Find Out Your FICO Scores

Your mortgage lender will underwrite your loan application using the middle of your three FICO scores. If you expect to purchase a home or refinance your current mortgage you should know your FICO scores in advance. If there is a problem it is best that you discover it, rather than your mortgage lender. Plan your credit repair strategy today.

Get the Right Scores

The credit scores sold by Experian and TransUnion are their own proprietary scores and can differ from your FICO scores by a significant amount. Equifax sells a true FICO score, but will apply the FICO model only to its own data, and it is not enough to have one FICO score. Your credit repair effort requires reliable information. The only site consumers can purchase their three FICO scores is myfico.com.

Check Your Revolving Balances

Your revolving balances have a dramatic impact on your credit scores. Many people in credit repair programs assume incorrectly that if they make their payments on time their scores will be fine. Later they wonder why their scores are languishing. A high balance on a credit card may cause a drop of over one hundred points your scores. You cannot afford for this to happen. When it comes to your mortgage, every point counts.

Bring Your Balances Down

Plan in advance and bring your balances down as much as possible before your make your mortgage application. The FICO scoring model recognizes five levels of credit card usage: 20, 40, 60, 80, and 100 percent; the lower the balance the higher the score. Here is some great credit repair advice, if you have the ability you should reduce your balance below 20 percent of your credit limit.

Proofread Your Reports

Once you have all three of your credit reports you should take the time to proofread every bit of information. Remember that you may be living with your new mortgage payment for many years to come. Don't make the mistake of believing that if the information on your report looks familiar it is accurate. Credit repair requires a bit of healthy skepticism. There are many types of errors possible; not all errors are obvious. I suggest that you spend a couple of hours examining your reports. It may be the best investment of time you ever made.

Fix the Derogatory Information

Look carefully at the derogatory information on your reports. Common errors include duplicate accounts and accounts that are reporting beyond the seven year reporting period limit. Keep in mind that the reporting period for a collection starts with the first missed payment in the sequence that led to the collection status. Collectors often reset the clock accidently, or otherwise, and report well beyond the expiration of the legal limit. You should also know that when a collector sells a debt, or returns it to the original creditor, they are supposed to cease reporting, but rarely do. This is a great credit repair opportunity.

Fix the Positive Information

Many of the errors that can hurt your credit scores are not derogatory and are harder to spot than a thirty day late payment or a collection. A patient credit repair effort will pay off. Some of the errors that commonly go unnoticed include under-reported credit limits and misreported account opening dates. Under-reported credit limits can make it look like your credit card is maxed-out and your score will reflect this. Misreported account opening dates can make it look like your account is newer than it really is and you will lose points.

The Power of a Rapid Rescore

If you find yourself needing to improve your credit score quickly, try a Rapid Rescore. A Rapid Rescore is a tool offered only by mortgage brokers. It allows you to furnish documentation that balances have been paid down, or that derogatory information has been resolved or is reported in error. The mortgage broker provides the documentation to the credit bureaus. They in turn recalculate your score within three days. Instant credit repair. There is a small cost involved, but it can be well worth it.

Hold off on New Purchases

Too many people make the mistake of making large purchases before they apply for a mortgage. The effect is to inflate revolving balances and deflate saving accounts, thereby lowering credit scores and weakening the mortgage application. Wait until you close on your new mortgage before purchasing your new furniture. Hold off on all significant transactions. Save your money and preserve your credit scores.

New Credit and Your Credit Repair Effort

Your credit score is determined by both the negative and positive information on your credit report. If you do not have any open credit your credit score will suffer. Many people in credit repair programs open secured credit cards to start the rebuilding process. That's a good idea, and very effective. But be careful of the timing. The first month a new account appears on your credit report your score will fall. If you need to build new credit don't wait until the last minute.

Copyright 2007 James W. Kemish. All Content. All Rights Reserved.
About the Author
Jim Kemish, a nationally recognized credit repair and restoration expert, is the president of Sky Blue Credit, a leading credit repair service since 1989. Jim is also the president of Power Mortgage, a Florida mortgage company.
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