Our clients often hear us say, “Credit score is everything!” In the world of mortgage lending, credit score can determine rate, loan amount and debt-to-income qualifying guidelines. And if a borrower’s credit score is not high enough– no explanation, letter or circumstance matters, only the score.
Fortunately, for those who do not have significant derogatory credit history, maintaining a high credit score can be distilled down to three simple rules.
1. Never make a payment late. We often hear clients comment regarding a late payment, “It was just a credit card and it is all paid up now”, suggesting it shouldn’t matter. Those days are long gone. Any payment made over 30 days late for any reason will hurt your score, the more recent the late payment the more dramatic the drop.
2. Do not assume your medical bills will be taken care of by your insurance company and do not pay collections without negotiating them off of your report. Nearly half of our clients have medical-related collections on their report of which they are often unaware. Medical entities automatically sell accounts not paid in full by insurance to collection agencies, often without notifying the patient. Collections always hammer your credit scores. Paying off collections will not help much. To repair your credit you need to get them DELETED. (Ask us how.)
3. Do not consolidate your revolving debt if you are planning on applying for a mortgage. Keep your credit card balances below 25% of the available credit limit. While it might make sense to put all of your revolving debt on one 0% interest card, any account with a high balance to limit ratio will send your credit score plummeting!