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Learn about the New Mortgage Credit Score - The Bills.com Blog
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Learn about the New Mortgage Credit Score
Question: My credit score is a 634 currently and I need to get to a 680 to get a no doc loan so I can refinance. I am closing on a house may 18 will this hurt my credit score. Will a mortgage hurt my credit score?
Answer: Your goal is to get approved for a new mortgage loan, so I can give a bit of advice on credit scoring(and how to improve your credit) as well as on getting your new mortgage:
1. Credit:
Credit scoring is generally too complicated a calculation for me to tell you how much, if any, a particular action will affect your credit score. I can tell you that a credit cycle is typically 90 days, and rising from a 634 to a 680 overnight is a challenge.
It might be important to understand how your credit score is calculated. Your credit rating is calculated based on several variables, including: your payment history (do you have any late payments, charge-offs, etc.), the amount and type of debt that you owe, if you have maxed out any of your trade lines, and then several other secondary factors like the length of your credit history and how many recent inquiries have been made to look at your credit history.
Paying off delinquent or maxed out trade-lines will almost always help your credit score.
However, a new mortgage loan may lower your credit score, as it will add a sizable amount of new debt to your credit history. One of the factors used in calculating your credit score is your “debt to available credit” ratio. If you have too much debt compared to available credit appearing on your credit report, your credit score will likely take a hit. A new mortgage loan will definitely increase your debt amount relative to your available credit, so it is likely the loan will have a negative impact on your credit score. However, as I mentioned previously, I cannot accurately estimate how much the loan will impact your credit score, so I suggest that you proceed with caution and discuss any potential loans with
your mortgage broker to make sure it will not cause your problems in closing on your home loan.
For more information about credit, credit scoring, and credit report, I encourage you to visit the Bills.com Credit Resources page.
2. Mortgage:
Your credit score is just one variable in getting approved for a new mortgage. You also certainly have the option of exploring other lenders and other loan programs (e.g. full doc loans, other stated income loans, and other options).
I can tell you that applying cannot hurt to see if you can save. Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs.
Also, make sure to get a free financial health check-up with Bills IQ!
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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!
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