Credit  F.A.Q.

Disclaimer: The information provided is intended to provide general information.  You may wish to contact our office, or the credit bureau’s directly for specific information regarding your situation and credit.

Q:         What can I do to improve my credit scores?

A:         There are only two things that make your score go up: good on time activity and the length of time from any bad activity.  Typically, once bad credit is older than 2 years it will not affect the score.

Q:         What are the best Credit Scores?

A:         Credit scores typically go up to 850, however the highest scores most people with excellent credit have is just above 800.  If your credit score is above 740, you are in the top tier for credit.

Q:         What score do I need to get a mortgage?

A:         Most lenders require you have at least a 620 credit score.  This does not mean if you have a 620 then you automatically get the mortgage. A borrower must meet many other underwriting requirements.

Q:         Should I pay off old collections?

A:         This is on a case by case basis.  If the collection is under 2 years old in most cases it should be paid off.  If it is 6-7 years old paying it off will start the clock again from the “date of last activity” and it will be on your credit 7 years from the payment date.  However, a paid $0 balance collection is always better than a collection with a balance.

Q:         How do I get incorrect information off my credit report?

A:         Each credit bureau reports information provided to them from specific companies.  If you find something wrong on your report you first have to identify which bureau is reporting it.  Then you need to write a letter of dispute to that credit bureau and they will contact the company to verify the debt.  If the company cannot verify it or does not respond the bureau must remove the information within 30 days.

Q:         I need to apply for a mortgage now and I don’t have time to have the bureaus update wrong info which may raise my score, is there another option?

A:         Yes, we can go directly to the credit bureaus with the proof of a payment or challenge and they will amend it for our report, then we can get a new credit report score based on this information.  There is a cost for this service from the credit bureaus and it can get expensive, so ask your loan officer for an estimate prior to having this done.

Q:         I am having financial difficulties, what should I pay first?

A:         You should always pay your mortgage first, then installment debt such as student loans and car payments.  Call your installment lenders right away. If your account are in good standing many times they can defer student loans or put a car payment on the end.  This will help maintain your good credit history.

Q:         I have a judgment on my credit; does that need to be paid off?

A:         Most lenders require a judgment be paid in full or “satisfied.”  You will need to contact the creditor and negotiate the payment, then provide the credit bureau with written proof so they can update it to a paid status.  Paying off a judgment will not remove it from your credit report; it will remain for at least 7 years.

Q:         I owe Federal Income Taxes; can I still get a mortgage?

A:         Yes, most lenders will require them to be paid in full or under a written repayment contract for at least 12 months.  You should be prepared to show the written contract and cancelled checks for each payment.

Q:         Once I get a pre-approval is it guaranteed deal? 

A:         A pre-approval says you have met the preliminary review of income, debt, employment, and assets.  Although we never write a pre-approval unless we have done our research and feel confident the loan will close, sometimes things are out of our control.  It is never a done deal until the loan closes and funds.

Q:         Our loan is already in processing, can I go buy new furniture?

A:         NO, once the mortgage process starts do not purchase anything or charge on your credit cards.  Small purchases like gas and things are normal, but don’t make any large purchases.

Q:         We are thinking about buying a car, is it OK to buy the car then apply for a mortgage?

A:         You should talk with a loan officer prior to purchasing the vehicle.  We have had several clients who just bought a new car and then try to purchase a home, but can’t qualify now because of the new car payment, so call us first! 

Q:         How do inquiries affect my credit score?

A:         Numerous inquiries tell the credit bureaus you are attempting to get credit with a lot of companies.  This can show an out of control borrower which creates a larger risk of default.  So the more inquiries you have can cause your score can do down. 

Q:         I had a car repossessed, can I purchase a home?

A:         Most lenders will require the repossession be more than 24 months old.

Q:         How does Chapter 7 and 13 Bankruptcy affect getting a mortgage?

A:         Most lenders now require you to be out of a Chapter 7 Bankruptcy for at least 48 months. If you are in a Chapter 13, you will have to get the Trustees permission to purchase a home.  To date we have had clients ask, but they have not been granted permission from the Trustee.

Q:         Why do you check all three credit bureaus?

A:         Our lenders require us to pull the information from all three of the major credit bureaus.  Lenders are not required to report information to all three, small banks or credit unions often report to only one bureau, making it necessary to get a report from all three.

Q:         I have a credit report I pulled offline, can you use that?

A:         No, we must pull our own credit report because we pull a FICO report.  Many credit reports you get online are calculated differently and the scores can be very different.

Q:         My credit report is showing I am delinquent on child support, but the payments are taken from my paychecks every week, how can I be behind?

A:         Child Support laws vary by State; in Texas typically child support will not show on a credit report until the payer becomes delinquent and a judge orders wage garnishments.  Then every payment will be posted on the credit report as late since the original agreement was not paid as agreed.  Typically most lenders will require proof of on time payments for at least one year.  Once the behind payments are paid in full the account will reflect current.

Q:         I went through a divorce and the things my ex was supposed to pay are on my credit, do they have to be counted in my debt?

A:         Once you are divorced, we will request a copy of the signed divorce decree from the Judge.  This document will identify which party is responsible for what debt.  We then can take this debt out of your debt to income ratio.  NOTE*** Any debt your spouse is responsible for after the divorce should be refinanced into only their name.  Just because they are awarded the debt in the divorce, does mean they will make the payments. If it is a joint account and they do not make the payments, it will damage your credit report.

Q:         I co-signed on a car for a family member; does that have to be counted in my debt?

A:         Yes, this debt will show on your credit and we are required to count it.  The only way for us to remove this payment from your debt is to get written proof (cancelled checks) for at least one year showing the payments have been made by someone else.

Q:         We want to keep our current home, how does this work if we buy another home?

A:         Most lenders will allow you to do this.  They do require that you have a higher amount in savings.  They will require you have at least 6 months of the existing payment in savings AFTER you pay all of the closing costs and down payment of your new home. If you are renting your current home you will need a signed 12 month lease with copies of cancelled checks for the deposit and first months rent.

Q:         Will our credit score go down once we purchase a home?

A:         Your score will typically go down after any purchase.  Once your account is more than 12 months old your score will typically go up.

Q:         Do you recommend a Credit Repair Company?

A:            Although there are some good and reputable credit repair companies; many are only taking clients money and not doing what they promise.  As a company, we do not support or refer to a specific credit repair company. Should you look into a specific company, ask for references and check with the BBB for complaints.