Viewing entries tagged

Preparing Your Credit for a New Mortgage


Preparing Your Credit for a New Mortgage

So you are ready to take the plunge and apply for a new mortgage loan this year? Great! Congratulations on making the decision to become a homeowner. With low interest rates, tax advantages, and a host of other benefits that come along with purchasing a home, you have about a million reasons to break free from the shackles of renting.

You can set yourself up for success during your entire home buying experience by knowing what to expect ahead of time. Most importantly, you should be sure that your credit is in tip top shape so that you can qualify for the most attractive rates and terms available on your new mortgage. Check out these 5 steps to help you get started.

1. Check Your Credit

There’s nothing worse than filing out a mortgage application only to find that some unwanted “surprises” have shown up on your credit reports. Unfortunately, this is a very common problem. However it doesn’t have to be since you can access your own credit scores and reports online 24/7. Plus, contrary to a popular credit myth, checking your own credit does NOT harm your credit scores whatsoever.

CLICK HERE for a list of great resources where you can access your 3-bureau credit reports and scores. Finding out exactly what is on your credit reports prior to your loan application should definitely be the first item on your “to do” list during the home buying process.

2. Dealing with Surprises

If your credit reports were all 3 squeaky clean when you checked them in step 1, then skip down to step 3. However, if you found errors or blemishes on your credit reports then you may have some work to do before applying for a mortgage.  Remember, you have the right to dispute inaccurate and unverifiable accounts with the credit bureaus. You can dispute accounts on your own, but you also have the right to work with a professional if you are too busy or feel overwhelmed by the process. CLICK HERE to schedule a no-obligation credit analysis to develop a professional plan to help you work toward cleaner credit reports.

3. Optimize Your Scores

Even if you have no errors or derogatory items on your credit reports (i.e. collection accounts, charge-offs, tax liens, judgments, etc.), it may still be possible for you to improve your credit scores. Take a long hard look at your credit card balances. Paying your credit cards down to $0 can potentially have a very BIG impact upon your scores. (CLICK HERE to read “The Perfect Credit Card Balance.”)

Can’t afford to pay off all of your credit cards? You still have options. Paying down even a few of your cards to zero might still be beneficial to your credit scores. Plus, you can always consider a debt consolidation loan to transform that score-lowering, revolving credit card debt into much more credit score friendly debt – an installment loan.

4. Avoid Mistakes!

When preparing to apply for a mortgage, you need to be a credit boy scout. You don’t want to make any credit mistakes which could result in lower credit scores and a loan denial. Some of the most common mistakes you will want to avoid include making late payments on existing accounts, charging up your credit card balances, opening new accounts (that new car loan needs to wait!), and having your credit reports pulled excessively by lenders.

5. Monitor Your Credit Reports and Scores

There is no better time to keep a close eye on your credit scores than while you are preparing to apply for a mortgage. However, with so many credit monitoring options available, it can be difficult to choose. Keep in mind that a credit monitoring service which allows you to keep an eye on just one credit bureau and one credit score is not going to be enough. After all, when you apply for your mortgage the lender is going to take a look at all 3 of your credit scores and all 3 of your credit reports – Equifax, Trans Union, and Experian. CLICK HERE for a list of several different 3-bureau, 3 score credit monitoring services to see which one is the best fit for you.

Buying a new home is an incredible and exciting experience. However, credit problems during the mortgage application process can often turn what could be a wonderful experience into a nightmare. Follow these 5 steps above and set yourself up for mortgage success. It can be tempting to take shortcuts, but putting in the work on your credit ahead of time will pay off every time.


Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars on various credit and financial topics. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

Trending Articles



New Home Closing!

Congratulations to a new HOPE homeowner! Here's a note that we just received: "Oh thanks so much...closing went GREAT!!!! So I thank you and your team for all your hard work in improving my credit!!!"

~K. Carr



Will the New Credit Scoring Model Help Me?

New Credit Scores
New Credit Scores

Have you heard about the new credit scoring model that has just been released? I have had a ton of questions this week regarding the new version of VantageScore and I know that many of our readers are wondering how this new scoring model will affect them. So, here's the skinny, the scoop, the 411 about the new, potentially exciting version of VantageScore. First of all, for those who are confused, let me explain exactly what the VantageScore is and how it is used.

VantageScore is the credit scoring model created by the 3 major credit bureaus - Equifax, TransUnion, and Experian. A credit score is a number which represents your creditworthiness, a number that lenders rely upon when deciding whether or not to loan you money for a car, a home, etc. If you visit one of the 3 credit bureau's websites and pay to pull your credit report you can receive a copy of your VantageScore. However, while VantageScore is used by some lenders, the vast majority of lenders will look at your FICO credit score anytime that you apply for a loan. (FYI, if you want to access your FICO scores you can do so for a fee at, but only from 2 of the 3 major credit bureaus.)

FICO scores and VantageScores are different because they use different scoring models to determine a consumer's credit score. The range of a FICO score is between 300 and 850. Previously, the range of a VantageScore was between 501 and 990. However, under the new VantageScore 3.0, the scoring range is being changed to match FICO's range of 300 to 850. I believe this is a great move for consumers because it will help to reduce some confusion with regard to credit score ranges. Still, even though the scoring ranges will match a consumer would still have a different VantageScore than his/her FICO score. For example, if Joe Consumer has a 680 VantageScore under the new scoring system he will not automatically have a 680 FICO score. The reason for the score difference is because both VantageScore and FICO have different scoring models - an action (i.e. paying off a collection account) may trigger a score increase under one model, but no increase under the other.

The most exciting change for consumers under VantageScore 3.0 is how the scoring model treats paid collection accounts. The previous version of VantageScore would factor collection accounts into the credit score for 7 years, even if the collection account was paid or settled by the consumer. So, under the previous model a collection account with a $0 balance would hurt a consumer's credit scores. VantageScore 3.0 will NOT factor paid/settled collection accounts into a consumer's credit score. A consumer who has $0 balance collections on his/her credit report but no additional negative activity will likely see a significant increase in their VantageScore. This is a very big change and, in my opinion, great news for the consumer.

Unfortunately, as I mentioned above, this change only applies to VantageScore 3.0, not FICO. Since the large majority of lenders currently use a FICO scoring model the new changes will probably not help someone who is applying for a mortgage or a vehicle. We can only hope that, in the future, FICO follows suit and changes their scoring model as well or that more credit grantors begin to adopt the VantageScore for use in their lending decisions. I would not expect any immediate changes, but I do believe the new VantageScore scoring model is a win for consumers.

Michelle Black is an 11+ year credit expert with HOPE, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.



Our Dream Home!

We received the following email from 2 of our recent HOPE graduates. Congrats to Wendy and Andre from the HOPE team! We could not be happier for you! "Hello I hope you all are doing well. Just wanted to say thank you for all your help and support. Because of you all are credit is great and we purchased our dream home a few months ago! Not just a home but our dream home. Thank you so much." ~Andre A. and Wendy A.



A New Mortgage Friendly Credit Score?

By Sara Bovat of National Mortgage News. CoreLogic and FICO this week released the FICO Mortgage Score Powered by CoreLogic. This new offering evaluates the traditional credit data from the national credit data repositories and the supplemental consumer credit data in the CoreLogic CoreScore.

This is aimed at increasing the number of mortgage loans that lenders make by improving the quality of their credit decisions on loan applications.

In a question-and-answer session with Asset Securitization Report, Tim Grace, senior vice president of product management at CoreLogic, spoke about why the product can potentially drive the number of the country’s mortgage originations higher.

ASR: A recent FICO quarterly survey showed that bankers lack confidence in the housing finance market. What attributes of this new product can help bring this back?

GRACE: The CoreScore credit report incorporates credit history-related data about potential borrowers and existing customers that was extracted from CoreLogic proprietary databases. The databases represent the largest and most complete collection of real estate and public records in the nation, covering 99.9% of the U.S. population. Rental information and nontraditional lender data are also incorporated into the CoreScore supplemental credit report. Since it is updated continuously, the CoreScore credit report provides additional data to augment the information provided by the traditional credit report companies. The FICO Mortgage Score Powered by CoreLogic is a new score that combines the supplementary consumer credit history from the CoreScore credit report with the credit information that is typically provided by traditional credit repositories. We believe the lenders want to approve more borrowers and we think this score will help them do so in a safer manner.

ASR: What makes CoreLogic’s information analysis more accurate and safer for lenders than traditional credit data?

GRACE: The FICO Mortgage Score Powered by CoreLogic is specific to predicting mortgage defaults. The data that was used to develop the model is from recent consumer behavior. This is why the information better represents how today’s borrower behaviors affect credit risk. In our sample of 300,000 mortgage applicants, the score also would have enabled 3,100 more consumers to qualify to purchase a home at a credit score of 700 or above criteria.

ASR: What change did you make to the CoreLogic CoreScore credit report introduced in October 2011 to further improve accuracy?

GRACE: CoreLogic is focused on increasing the transparency into borrower credit behavior. In addition to the new FICO Mortgage Score Powered by CoreLogic, the CoreScore credit report now contains rental information and alternative credit data. All of the data is seamlessly integrated into a single, real-time credit report.

ASR: How does this product help the prequalification and origination phases of the process? Will borrowers be more likely to prequalify for loans?

GRACE: The new FICO Mortgage Score Powered by CoreLogic was designed for mortgage origination from prequalification to prefunding. Analysis of the new score shows that, for a great many consumers, the inclusion of additional credit data could help them. Over 70% of consumers in our sample scored higher with the FICO Mortgage Score Powered by CoreLogic than they did with scores in general use today, and 24% saw their scores increase by more than 50 points. For borrowers in the 580-619 range or those that are close to a lender’s typical credit score minimum, 45% of that population saw their scores improve enough to meet the credit score threshold.

ASR: How will the new scoring model developed by FICO help mortgage lenders more safely and profitably expand their origination volumes? Does it create more transparency or does it better borrower prequalifications?

GRACE: The new FICO Mortgage Score Powered by CoreLogic uses the same score range as traditional FICO scores, making it easy for lenders to operationalize, and for consumers to understand. The new FICO Mortgage Score Powered by CoreLogic is more predictive than generally available credit risk scores due to a number of factors: 1) FICO extracted predictive value from the incremental data contained in the CoreScore credit report; 2) The data that was used to develop the model is from recent consumer behavior, better representing how today’s borrower behaviors affect credit risk; 3) This model is specific to predicting the likelihood of mortgage default at the point of origination; 4) A single risk score is produced, reflecting borrower credit risk using both traditional and supplemental credit data.

ASR: How does CoreLogic’s data contribute to this partnership with FICO?

GRACE: The CoreScore credit report contains information from the CoreLogic proprietary databases of nearly 1 billion consumer credit transactions. By leveraging this data with the FICO’s expertise in analytics, a series of predictive models will be developed to increase visibility into borrower credit risk. The FICO Mortgage Score Powered by CoreLogic is the first model available in production, which leverages data only available on the CoreScore credit report.