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3 Things Mortgage Lenders Hate On Your Credit Report

If you’re in the market for a mortgage loan to finance your dream home, you don’t want things on your credit report to sabotage your chance of getting a loan. These 3 problems below are among the biggest turn offs for mortgage lenders and can hurt your chance of getting a mortgage loan if you don’t fix them beforehand.

Below are three things mortgage lenders hate about your credit report and to how to fix them before you begin your mortgage loan shopping.

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1. Delinquency.

Delinquency on your credit report is one of the things that mortgage lenders don’t want to see on your credit report when shopping for a mortgage loan.

Delinquency is unpaid debt on your credit report. It can be a past due credit card bill or an unpaid car payment. Mortgage lenders hate delinquencies on your credit report, because that tells them you are less likely to make your mortgage loan payments on time.

How to prevent delinquency from making it to your credit report: depending on how late you are on your payments, you can definitely prevent it on your credit report. For example, most creditors won’t report it to the three credit bureaus if you’re a month behind on your payments.

If you’re two months late, that is when the creditors will start reporting it to the credit bureaus. At this point, your credit score can be negatively affected by it. In fact, your credit score can drop by up to 100 points. When that happens, the chance for a mortgage lender to extend you a mortgage loan is low. 

If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.

Perhaps the easiest ways to fix this is to pay your bills on time. Plain and simple. According to myFICO,  credit payment history takes up to 35 percent of your credit score. So, it’s crucial to make your payment on time to avoid late payments.

Another way to fix this is to work out an installment plan directly with your creditors. Creditors would be very happy to work out an installment plan with you, especially if you’re experiencing economic hardship. It can be as little as $10 a month (depending on the type of debt,of course), until the entire debt is paid off.

You can also negotiate the debt with your creditors by paying a portion of the settlement debt, say 60 percent of it. This usually works out well when your debt is in collection. Collection agencies will just take pretty much whatever you offer. The key is good communication and negotiation.

2. Too Many Inquiries on Your Credit Report.

Mortgage lenders view several inquiries on your credit report as a red flag. This is because it gives the impression that you’re in some sort of financial trouble.

A credit inquiry is when you apply for a new credit card, for example, or when you’re applying for a rental apartment, applying for a car loan, etc…

Inquiries can last up to a year sometimes 2 years on your credit report. 

To fix this is quite easy. If you know you will be shopping for the best mortgage loan rates, just avoid applying for new credits. 

3. Your Utilization Rate is High.

Another thing that mortgage lenders will hate on your credit report is a high utilization of your available credit. If a lender sees a large balance on your available credit, they might be a little wary. This may give them the impression that you’re not able to pay your obligation in full. This, in turn, might hurt your chance of getting a loan for your dream home.

To fix this, keep your utilization rate below 30 percent and try making payments every month or in full.

In conclusion, mortgage lenders want to make sure you can manage credit well and can pay your financial obligations. So, it’s always a good idea to make sure these things are not on your credit report.

Because these things will negatively impact your credit score. If you have a low credit score, you might have difficulty getting a loan. And if you do get a loan with a bad credit score, your interest rate will be higher. Find out: How to Raise Your Credit Score to 850.

If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.

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