The best way to ace credit repair services during mortgage approval
Contrary to what many people believe, money lending is one of the oldest professions. Without a doubt, issuance of credit has evolved. New forms of credit keep cropping up, thanks to technology. Looking back to when civilization started, individuals living together have always borrowed from one another. As the society progressed, there arose the need for a legal system. Hammurabi, who ruled Babylon from 1792 BC to 1750 BC, established the Code of Hammurabi. In there, historians found laws that gave directions on the interest that a moneylender could charge. An interesting observation was that for every loan issued, a public official was to witness and the same was in a written form.
Restricted interest rates
Back then, moneylenders could not charge high rates of interest – there were consequences. As a borrower, you had to give collateral in the form of land, your wife, children or slaves. However, the law put a caveat on the period for the enslavement of an errant debtor at three years. Babylonians had a banking system that operated in the same way your bank does. Their banks offered loans and accepted deposits from customers with all these services charging or paying interest to the parties involved. An understanding on how far lending and borrowing have come is essential when discussing credit matters.
By now, you would have already understood what a credit report is and its importance it holds when you interact with lenders. To recap, it is a document that summarizes your credit history. Credit bureaus collect information about your money borrowing and paying habits. They then compile a report and put a score on your performance. Part of the summary contains information such as: –
- Your bank accounts
- Dates when you opened them
- Details of past due accounts as well as those in good standing
Generally, negative information stays on record for seven (7) years while bankruptcy reports can remain for up to ten (10) years. If you apply for a mortgage, the lenders usually request the credit bureaus to share their reports. While there are many credit bureaus in the United States, Transunion, Equifax, and Experian are the most utilized. They are also the largest reporting bureaus.
Home ownership – nugget of gold
Owning a home is one of most pursued dreams by most US citizens. If ever there was a purchase of a lifetime, buying a house is one of them. To achieve this objective, you will borrow money in the form of a mortgage. You must be careful when obtaining a loan for your first home. A wrong move will see you squander money that you could have used to meet other financial goals. The worst-case scenario is losing a home to foreclosure as was the case in the late 2000s. The property market took a severe beating, and many people faced painful foreclosures. Considering the chunk of your monthly income that a mortgage payment consumes, you cannot take chances when shopping for this service.
If you are rich enough to pay for the property in cash, the price is what determines whether you cannot afford it or not. However, for the majority, acquiring real estate requires financing, and this is where things become murky. Lenders have their terms and how you negotiate for the total price of your home. The overriding question remains that of whether your borrowing power is strong or weak. Let us start from the top. In case you don’t know, a mortgage refers to the loan consumers take out to buy a home. Repayment consists of monthly installments for a period of between 15 to 30 years.
Qualification – mortgage loan approvals
Suppose you have decided that you can proceed to secure a loan. You begin the search for a suitable house. You quickly make a purchase offer and start praying that the lender will approve. Several weeks later, you receive a phone call that you wish never came. The bank’s loan officer calls to deliver the sad news that the bank cannot process your loan application. You need to improve your credit scores. That type of answer can be very depressing, considering that you have spent hours searching. Besides, there is money already spent on property inspections.
Underwriting – this is how a lender finds out
To understand the concept of underwriting, assume that a close pal approaches you. He asks to borrow $10 and promises to return it on his payday. You will oblige and lend him the money. Now, imagine your reaction when he tells you to give him five thousand dollars and that he will pay you in 10 years. Before you brand him crazy, you will analyze whether he can keep his word or not. Banks too, adopt a similar approach. However, they hire professionals known as underwriters. They evaluate the risk involved when the bank lends you money. If they find you too risky, the lender rejects your application. Part of the underwriter’s assessment consists of scrutinizing items on your credit report.
Mortgage lenders will pull your credit status and analyze your record. They are keen on finding out whether you ever:
- Filed for bankruptcy
- Have balances other debt, e.g., credit cards, car loans
- Have been a delinquent on credit card payment for over 60 days
- Have made several other inquiries for a credit facility in the last 12 months
Restoring your credit dignity
Despite the frustration, rejection of your loan application is not the end of the world. Repairing your credit is the next step you need to consider. A credit repair expert will help you establish why your prospective lender made that decision. They will request for copies of your credit report. For the sake of registering progress in your credit history, consider putting off your home buying project for the next six months or even a year. In the meantime, commit to pay all outstanding debts. You may also have to reduce the balances on your credit cards. Credit repair services will come in handy. Once you achieved the objective, you can go back to the lender and reapply for the mortgage.
Refinancing – your possible comeback
Refinancing only works if you have an existing mortgage and are seeking different terms. However, for you to refinance, you must go through the qualification process again. To improve your chances, you can prove to the lender that in the past one year you have made tremendous progress that helped you raise your credit scores. For example, if you paid your installments on time and did not delay even once, then you have a strong case. Another proof you could use is that you did improve your income level.
Credit repair during mortgage approval
You failed to qualify for a mortgage, and now you are back to the drawing board. Credit repair organizations know where to push to have ‘bad credit’ items deleted. Those are always annoying. Even as you seek professional help, always remember that everything a credit repair company will do you too can do the same. The only difference is that you may not have adequate time to do the research needed. Besides, mortgage approvals depend on rules and regulations set by the industry. For instance, you cannot raise your score dispute as the disputed item will automatically trigger the formula used in arriving at your score. Systems deployed by credit bureaus treat the flagged items as if they do not exist.
Deletions that do not reflect on public records
Deleting charge-offs and unpaid collection accounts can be of great benefit when applying for a mortgage. However, the deleted items will do not show on the public records, meaning that no one will know. Unlike other forms of credit, lenders for real estate acquisition do not merely focus on your credit score. They dig deeper into your credit history.
Outstanding collection accounts cannot hinder you from qualifying for a loan. However, if the credit repair service insists on having the collection account struck off your records, it must be done by the three leading agencies. Also, if you have any outstanding medical collections, you need not worry since the industry exempts such from scrutiny.
Items that go to the public records include:
- Tax Liens
- Child support
Lenders will always search for public records and will discover if you have had any of these. If your credit repair consultant had fought to have them removed from your credit report, the bank will still know that you had them.
In your mortgage application, you will find an array of questions. The financier is interested in finding out whether you filed for bankruptcy. They also want to know about judgments and if you were involved in a lawsuit. Be truthful in your responses because either way, the mortgage company will contract third parties to search the national public records. Any deletions made through the credit repair activity will show up. To avoid running around in circles, look for a credit repair service provider who understands how to prepare consumers with credit issues for mortgages.
The use of credit is as old as human civilization itself. There is proof that Hammurabi, an ancient ruler of Babylon issued rules on the handling of debt and charging interest to defaulters. Negative information can ruin your chances of securing credit. Nothing can be more frustrating to a consumer than being turned away during a mortgage application process. When you reflect on the time, money, and other resources you have utilized, being told that you are not suitable is not only shocking but stressful.
Nonetheless, you must do your research when securing a home loan. Check that you do qualify and if the lender declines your request, seek help and attempt to raise your credit scores. Some matters go into public records even without your knowledge. Also, if a credit bureau deletes them, lenders will still find out. However, you must never ignore credit repair services. Some experts run these agencies, and they are always willing to lend a helping hand.