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Before deciding on what terms they will offer you a mortgage loan, lenders must discover two things about you: whether you can repay the loan, and how committed you are to repay the loan. To assess your ability to repay, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthiness. We’ve written a lot more on FICO here.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score comes from both the good and the bad of your credit report. Late payments lower your credit score, but consistently making future payments on time will raise your score.
For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is enough information in your credit to calculate a score. If you don’t meet the minimum criteria for getting a score, you might need to work on a credit history before you apply for a mortgage.
It’s virtually impossible to change your score in the time between when most people decide to buy a home or refinance their mortgage and when they apply. So the short answer is, you really can’t “on the spot.” But there are strategies you can live with to make sure when you apply for a loan your score is as high as possible.
Make sure that the information each of the three credit reporting bureaus has on you is consistent and up to date. Order a copy of your credit report about once a year, and dispute any inaccuracies.
Note: Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in the law though have made “consumer-originating” credit report requests not count so much. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to keep up with what’s on them, and smart consumers shop around for the best mortgage and car loans.
Licensed in Colorado as Maestro LLC (DBA Mortgage Maestro Group) is an Equal Housing Lender.
Consumers wishing to file a complaint against a company or a residential Mortgage loan originator should complete and send a complaint form to the Texas department of savings and mortgage lending, 2601 North Lamar, suite 201, Austin, Texas 78705. Complaint forms and instructions may be obtained from the Department’s website at www.sml.texas.gov. A toll-free consumer hotline is available at 1-877-276-5550. The department maintains a recovery fund to make payments of certain actual out of pocket damages sustained by borrowers caused by acts of licensed residential mortgage loan originators. A written application for reimbursement from the recovery fund must be filed with and investigated by the department prior to the payment of a claim. For more information about the recovery fund, please consult the department’s website at www.sml.texas.gov.
Home Mortgage Disclosure Act Notice. The HMDA data about our residential mortgage lending are available online for review. The data show geographic distribution of loans and applications; ethnicity, race, sex, age and income of applicants and borrowers; and information about loan approvals and denials. HMDA data for many other financial institutions are also available online. For more information, visit the Consumer Financial Protection Bureau’s website.
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