Credit Scores – Why are They Important?
Credit scores are important because they show you, as a client, and your history with paying bills on time and managing your debt to income ratio. So by looking at it, lenders have a good idea of your history of paying (on time or otherwise) and what you currently owe and to whom. Your past is essential in that it shows if you can be responsible with paying bills, which as a lender they want to know you can do. It’s necessary, before even applying for a loan, to check your score, if you have a bad credit score, no credit score, or other issues you should correct them before applying. You can get a free credit report every twelve months at or .
The Scores range from 350 to 850. Credit Score Ranges:
- • 720+ Excellent
- • 680 – 719 Good Credit
- • 620 – 679 Fair Credit
- • 580 – 619 Poor Credit
- • 579 or under Bad Credit
The following things appear on your credit report:
- • A list of debts and history if how you paid them, and
- • Any Bills referred to a collection agency
- • Public Record Information (Liens and Bankruptcies)
- • Inquiries made about your creditworthiness
If you look up your credit score and find it’s not where you want it to be there are a few things that can help boost your score before you apply:
- • If you have debt, make sure you’re making full payments on time.
- • If you have credit cards, don’t let the balance roll over month to month.
- o Avoid making large purchases on credit cards or using the maximum credit balance (even if you do pay the balance off and in full) right before applying.
- • Don’t open new lines of credit or close old lines of credit before applying.
So You’ve Been Denied – What Can You Do Now?
If your mortgage application is denied, the lender should explain precisely why you were rejected and possibly provide you with resources on how to best tackle the problems. A bad credit score is one of the big reasons for being turned down for a loan. A good start, if you haven’t already, is checking your credit report. You can see any trouble areas, possibly pay them off, or catching up on back payments. Another issue is an incorrect credit report. It could be as simple as a mistake with someone with your same name or even as far as identity theft, but if there is something that you don’t remember on your credit report, then you should look into and possibly dispute it to get a fraudulent charge taken off. Having too high of a debt to income ratio is also an issue, the best way to fix this is to get rid of some of your debts before trying to purchase your home. Having too low of a down payment you mostly need to save up, or if you have someone willing to gift you the money than you need a letter explaining that.
Employment changes are one of the last of the more common issues related to denial. While you can try explaining your situation and why your employment has changed recently but if you have the time try hanging onto the job at least six months to a year to establish employment stability. There is more in-depth information found .
Overall there is a lot that goes into trying to get preapproved by a lender, both time and documentation. But the tradeoff is quicker bid approval and closing and possibly better rates. Even if you are denied they will give you the information you need to know why and how to potentially improve upon the issue so you can apply again in the future after any problems are resolved. So even if you want to buy a home, but you’re not quite there yet, there is still plenty you can do, and pre-approval is just one of many steps to help along the way. You can also contact us, , for any other questions and applying for best mortgage rates in Fort Lauderdale.