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Brokers and originators also should note that it’s important for prospective homebuyers to avoid major purchases in the months before closing, as Freddie Mac now requires lenders to look into credit-report inquiries made against a borrower’s account in the 120 days prior to closing. To help companies ensure that they’re meeting the new Freddie Mac standards, the organization offers a risk-assessment tool called Loan Prospector, which provides access to Freddie Mac’s credit and pricing terms and helps ensure borrowers get the lowest-cost financing that’s available.
There are a number of actions that you can share with your borrowers that may impact their credit scores. That said, new rules from the Federal Housing Administration make it imperative that some of those efforts be completed 90 days before filing loan papers. For instance, disputed accounts with more than $1,000 must be paid in full or be set on repayment plans 90 days before a loan’s application. Not doing so can adversely affect a person’s credit score and ability to qualify for the loan in question.
Rescoring tools, which are typically available from credit-information companies, can be helpful in providing direction to borrowers on how to impact their credit scores. Such tools not only provide a detailed analysis of a borrower’s score, but also enable mortgage professionals to simulate changes to determine courses of action that may be advantageous.
In addition to utilizing a rescoring tool, there are several other actions borrowers can take, such as:
• • •
Don’t use more than half of your available credit.
Keep paid-off accounts open.
Apply only for the credit you need — don’t open new accounts just to get an incentive.
Pay your bills on time.
Keep using credit cards prudently, even if you’ve had problems in the past.
Bring all card balances under 33 percent of each card’s credit limit. If possible, shift the balance from high-balance cards to other cards to accomplish this. Do not, however, attempt to achieve this by opening another account or by increasing the line of credit on a specific card.
Pay at least the monthly minimum on each card to decrease balances.
Freeze all major spending and don’t use any line of credit when you’re trying to secure a loan.
Work with the credit-reporting agencies to correct errors on your account.
Let experts lend a hand and use scoring technology to reassess your score.
As a mortgage professional, urge your borrowers to begin looking at their credit files months before applying for a loan, and then help them work their way through any issues at least 90 days in advance. By bringing your borrowers up-to-speed in these respects, you can help them clear any unexpected hurdles that may occur on their way to homeownership.
Greg Holmes is national director of sales and marketing at Credit Plus Inc. in Salisbury, Md.
Credit Plus has been a provider of credit and mortgage-information services since 1928. Reach Holmes at email@example.com.
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