Texas Mortgage & Real Estate Thoughts

In the mortgage profession, you tend to see a lot of credit reports. With each transaction, the clients credit is pulled and reviewed with them. Personally, I go line by line to ensure the reporting is accurate, even when the clients credit score is very strong.  The last thing I want to happen is to not know about an additional debt not listed or to find out that some items are reported erroneously.

When reviewing the details with clients, I find there are many questions / concerns about what is being reported. Clients grow more and more concerned, the lower the credit score. In today’s market, the credit score is a huge driver of what a client will get approved for or what fees will be associated with a refinance or a purchase.

Of all the questions, I hear these three the most and I thought I’d talk about them a little.

• Checking your credit will not effect your credit score.
• Paying off my bad debt will remove them from my credit
• Bad information on your credit report can not be changed

First of all, checking your credit too many times can definitely effect your credit score. Its almost like giving the Credit Bureaus a sign that you are going to get yourself into a ton of debt or that you are having financial problems. In many cases, a client is pulling credit because they are getting an additional line of credit OR that they are looking to refinance a mortgage, credit card, automobile, etc. Not everyone needs to pull your credit if you are just ‘shopping’, so be careful not to have everyone pull it. It is perfectly safe to have one company pull the report and provide you with the details. If you want to shop around, provide the other companies with your credit report for an accurate quote.

* quick note regarding too many credit pulls… if you decide to move forward with the company that did not pull your credit, the new company will likely need a new credit report, but the report you provided will at least give them the information needed to provide you with an accurate quote. *

The second item should not be a surprise to hear. If you have a bad credit history, and then you pay off that bad debt, the history does not get erased. The credit report will be updated to reflect the payment being made and that the account is no longer delinquent, but the history still remains. That delinquent debt will stay on your credit for years.

* quick note regarding bad credit or past due payments… do not assume that paying off ALL bad debt will improve your credit scores. Sometimes older items (years old) are best left untouched. The damage from those past debts have already done their damage to your scores so there is not reason to refresh that data.  This is not always the case, so it is best to speak with a professional that can provide you with assistance based on your specific situation. *

The last myth is that your past credit can not be corrected. This is probably the largest misunderstanding I speak with clients about. Just because something is on your report, does not make it accurate. Many credit correction companies are in business because of erroneous reporting. Unlike the second myth about past due debt, any history pertaining to an incorrect reporting would be removed as though it did not happen. The key is to have your facts, contact the credit bureau that is reporting the erroneous information, and follow-up for the resolution.

Here are just two examples of erroneous reporting:

• Payments that were made on time, but were reported as being late
• Old debt that was paid off but is still being reported as unpaid
• Past due debt that was not captured in a previously filed bankruptcy
• Someone else’s credit information listed on your credit report (often the case with “Jr” or “Sr”)

Not all situations can be handled the same. It is always best to speak with a professional that can provide you with some great instructions on moving forward. There are many ‘professionals’ that will claim to be able to assist. Your first step should always be to speak with a personal referral. If your friends or family can not recommend someone, use the internet. Clients are quick to file a complaint, write a blog post, or submit a review when they were unhappy with a service provider. Do you homework!

If you are working with a mortgage professional for your new home purchase or refinance, chances are very likely they can assist OR provide you with a contact that has helped many of their clients in the past.