According to AMEC’s Alejandro Juarez, here are the top three things you should never do when applying for a loan, as they can negatively impact your credit score and make it harder for you to get the loan you want.
1. Don’t cosign for a loan for someone else. This will impact the way a lender looks at your debt. When you cosign for someone else, their debt becomes your debt—even if they are paying it. If you want to take that debt off of your lender’s calculation, you have to show 12 consecutive months of payments from the other person on the loan. This means that if you are thinking of buying a home within the next year, you should think hard about how cosigning for a loan will impact you.
2. Don’t have frequent credit inquiries. Not only do you not want to be pulling your credit over and over and over again, but you also should not be doing it too far apart. If you are thinking of shopping for a lender in order to get the best deal possible, make sure you set aside a specific time frame (e.g., five to seven days) to do so. That way, credit bureaus can view it as a single shopping event instead of several shopping events spread out over the course of many weeks.
On that note, it is important to know the difference between a soft credit pull and a hard credit pull. A soft credit pull is usually done for consumer credit—things like credit cards and other smaller debts. Hard credit pulls, on the other hand, are much more in-depth and are used for much larger debts like mortgages. A hard credit pull will make your credit score dip temporarily, but as long as you shop for lenders within a tight time frame, your score should go back up.
3. Avoid 30-day late payments. Alejandro himself was once charged a 30-day late payment for a tuxedo he rented for his brother’s wedding, and it dropped his credit score from 790 to 690. If you’re struggling to keep up with your payments, put everything on auto-pay so everything gets paid on time. If things get tight and you have to make a late payment, don’t let it be 30 days late.
If you’re thinking of buying a home and would like to know more about what type of financing is right for you and what you can do to get the best mortgage possible, give Alejandro a call at (512) 710-9456.
As always, if you have any other real estate questions, don’t hesitate to call or email me. I’d be happy to assist you.