What Hurts Your Credit Most When Looking for a Mortgage?
One factor is your employment history. The length of your resume counts; home loan applicants who have less than 24 months of work history have a much harder time getting loan approval than those who have been on the job longer.
The type of income you earn can be an additional factor. Those who earn commissions, for example, must have earned those commissions for a minimum time period. When did you start earning such income? This can be a factor for those who are new to a non-salary or hourly position; for example, contractors who have recently switched to contract-type work and self employed borrowers who also have recently made the jump.
And what about FICO scores? Credit scores are not the sole determination of a borrower’s credit worthiness, as we’ve explored above. But your FICO scores play a very important part of that process. Bottom line. if your credit scores are low your lender will have a hard time justifying the loan.
The good news is that you can work on your credit scores ahead of your home loan (a year or more is best) and raise them through some best practices advised by all three major credit reporting bureaus.
These agencies (such as Experian, TransUnion, and Equifax) advise consumers that there are four factors that affect your credit scores. Experian ranks these factors from most to least influential (on your credit scores) on its official site as follows:
- Paying bills on time consistently.
- Age of your credit accounts and the type of credit, plus the percent of credit limit used.
- Total balances and debt.
- Recent credit behavior and inquiries and available credit.
Working on these issues improves your credit scores over time, and it’s best to expect the process to take more time than you realize to start working. The time invested is well worth the result.
A home loan is one of the most important investments you can make; buying a home means owning property, and being an owner means potential to watch your investment grow in value over time. Unlike buying a new car or truck, which depreciates once you take possession and drive it off the lot, buying a home means potentially getting more value from your investment as time goes by.
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