Credit Score Facts & Fallacies

Many people that I talk with are not sure about aspects of credit scoring. Here are common questions I hear especially with first time home buyers.

My score determines whether or not I get credit.

A mortgage file is like a jigsaw puzzle, in that there are many factors considered for approval such as the amount of debt you can reasonably handle given your income, your employment history, savings, and your payment history. The credit score is a corner piece however, and is usually the first thing a lender will look at when qualifying you.

A poor score will haunt me forever.

Not true at all. A credit score is a “snapshot” of your risk at that time. Scores change gradually as you change the way you handle credit, so if there were problems in the past they will have less of an impact as time passes. Many people do not realize that following any credit problems, it is crucial to establish new credit accounts and use them responsibly. While some accounts on a credit report can be removed, without those open accounts you will always have a poor credit score. Even if your credit report looks bad today, we can get together and get a plan in place to get you credit worthy in around six months, many times less than that.

I have a poor credit score and need to hire a ‘credit repair’ company.

Not always, and if you do be sure to be careful. There are many companies out there claiming to perform credit repair, and there are several that are ‘old school’ and will cause issues for you down the road. They will send disputes on all negative accounts to the three credit bureaus to try and get them removed. This is not the way to do it, as disputes on your credit report will hold up your approval process.

Sometimes if there are negative accounts on the credit report it’s not always necessary to hire someone to get negatives deleted. If there are a number of derogatory accounts sometimes I do recommend hiring someone to help you, because in my opinion this is not a do-it-yourself job. Once we review your current credit report we can get a plan in place.

Credit scoring is unfair to minorities. The Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type (and other) information when issuing credit. Factors like gender, race, nationality and marital status are not included. Bluntly put, my job is to get loans closed. If you are willing to have me as your Loan Officer, my only concern is working together to achieve the goals you have by obtaining a mortgage.

Credit scoring infringes on my privacy.

Credit scoring is just a number assigned to your performance in managing credit. That being said, I will have a lot of personal information and know a lot about you by the time we get to the closing table. I do not share any information with any third parties, including your Realtor. There are laws in place regarding my handling of any documents for your protection.

The only reason I ask for any document is because it’s required for your loan approval. We’re asking an Underwriter to approve a loan for six figures; we need to make them confident to approve the loan.

My score will drop if I apply for new credit.

Multiple inquiries from auto or mortgage lenders within a short period of time (30-45 days) are treated as one inquiry, allowing you to shop before moving ahead with a transaction. Typically, these are treated as a single inquiry and will have little impact on the credit score.

What can concern an Underwriter are multiple inquiries in a short period of time looking for credit from different sources. This can cost a few points on your credit score, so if your score is just above qualifying, or getting a better rate, we should complete the mortgage process before looking for any other credit.

I will help counsel you if needed to get into your home, or get you in a position to get a better rate on the home you have. We will set a plan to get you there; remember, the known is always better than the unknown.

John Lyng is a Mortgage Loan Officer with Supreme Lending. He is experienced with traditional bank programs, as well as alternative programs to help people get into their home. John has a varied background in working with mortgage banks and non-profits, and believes in guiding families to prepare for affordable homeownership.

If you have questions about this or any mortgage-related topic, please contact John Lyng directly at 214-862-3579, or send an email to John.Lyng@SupremeLending.com.