I recently received a phone call from a home buyer who was anxious because her mortgage originator had informed her that her credit score was below 720 and according to her LO, she no longer qualified for private mortgage insurance for the home she was in the process of buying.
Your credit scores are constantly changing. When your credit report is pulled, it's only a snap shot of your scores at that time. Recently, conventional lenders shortened the amount of time they will allow for a credit report to be used from 120 days to 90 days from the date the credit report was pulled. If your credit report is expiring before your transaction is closing, it may impact you for better or worse–with underwriting guidelines and/or pricing of your mortgage rate. Depending on what your loan to value is (how much home equity you have or down payment you're using) an expiring credit report with a dropping score can be detrimental to your loan approval.
Here are some steps you can take to try to make sure that your credit scores remain steady during your transaction.
- Be aware of when your credit report is going to expire.
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Do not make changes to your credit profile including:
- Do not pay off and/or close accounts (without first discussing this with your loan originator).
- Do not make or finance large purchases.
- Do not obtain new credit.
It's possible to do something as innocent as paying a collection on an overdue library book only to have your credit score drop.
You might consider meeting with your mortgage professional well before entering a mortgage transaction (refi or purchase) to review your credit and to see if there are actions you can take to improve your credit score.
If you find that your credit score has dropped during a transaction, take action immediately. Find out how this may impact your loan approval and/or interest rate and learn what your options are.
Hi Rhonda,
Add to this list: Do not get divorced while you are trying to buy a home! Several years back, I had a clients who were married, but wanted to put their new home purchase in just the wife’s name. So without telling anyone, they filed for divorce since their credit report had been pulled. Needless to say, they had to cancel the divorce proceedings, go to a new lender, and consult with an attorney to find out the best course of direction. They did buy the home and took care of their “divorce” after the fact.
So don’t do anything new and exciting and different while trying to buy a home.
Thanks for your good advice, Rhonda.
Yikes, Debra…it’s amazing what people will try to get away with…sometimes w/good intentions but even so, they are potentially committing fraud.