Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant


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Pulling Credit Affects Your Credit Score

Credit Score

When I am talking to a client about preparing to buy a home, I always inform them to not apply for a new line of credit or credit card. Applying for a single credit card has a negligible effect on their score but applying for several in a short period of time does make a difference. Doing so can affect their over all credit score and can in turn change their eligibility for certain mortgage programs. When you apply for credit, an inquiry is generated. The creditor wants to determine what your current credit score is and what your credit history looks like in order to determine what program will best fit your needs and eligibility.

So, what is a credit inquiry? An inquiry is a notation on your credit report that someone has requested your credit file or that you have requested credit. Two types of inquiries may appear on a credit report. These are known as “hard” inquiries (can impact your credit score) and “soft” inquires (that don’t)

What counts as a hard or soft inquiry?

Applying for a loan or credit card can result in a hard inquiry, but applications not tied to a form of credit can result in a hard inquiry as well. A credit check for a new mobile phone or apartment, for example, can also generate a hard pull on your credit report. “The general rule is, if it is an inquiry that indicates that you may be taking on additional financial obligations, then that could be meaningful to your risk of being able to repay other debts,” says Maxine Sweet, vice president of public education for Experian, one of the three major credit bureaus. A cellular phone or apartment signifies the possibility of an additional monthly payment.
Soft Inquiries not related to a new financial commitment won’t hurt your credit score. These include credit checks from employers, companies sending preapproved offers of credit or insurance, existing creditors conducting periodic account reviews or your own request to see your credit file.

How inquiries are scored

Inquiries don’t count as much as payment history, revolving utilization and other factors that contribute to the calculation of a credit score. The actual impact of an inquiry can vary according to your credit history. If you have few accounts or a short credit history, inquiries can cost more points. The amount of points deducted may not be the same for each additional inquiry, as they might be scored in ranges. Past a certain threshold, the consumer could max out on the damage from numerous credit checks. Hard inquiries stay on credit reports for two years, but the length of time they impact the score depends on the scoring model (or credit bureau) used.

Multiple inquiries generated when rate-shopping for a mortgage, auto or student loan are consolidated by credit scoring models when done within a certain window of time. The FICO scoring model ignores multiple mortgage, auto and student loan inquiries in the 30 days prior to scoring but if shopping for all 3 in that window of time will alert lenders you are shopping for high priced items and reduce your score significantly. Stay off the new car lot when shopping for a home.
If you consider keeping credit inquiries to a minimum while shopping for a home loan you should be safe not to do any harm that will significantly impact your ability to get a quality mortgage. If you have questions or comments please contact me at Ingrid.quinn@cobaltmortgage.com or visit my website http://www.scottsdalemortgageexpert.com 


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Don’t Kill Your Credit Score!

credit shock
Credit, Credit, Credit! Your credit score is a crucial part of your financial future and present. Whether you are looking to open a credit card, buy a home/vehicle your credit score will not only dictate your ability to make that purchase, but also what interest rate you will have. You have three different credit scores, but for this article I am going to focus in on one and that is your FICO credit score. It registers on a range of 300 to 850.
You should strive to have a score of 780 or higher to be in the best shape to make major purchases with the best interest rates. In the mortgage industry we suggest that our clients hold a minimum of a 620 credit score. This is primarily the lowest score most, not all, lenders have as a threshold for a mortgage.
Now let’s get down to what this article is all about. What can damage your credit score and what you should look out for. I will discuss seven different things that can greatly affect your credit score.
Carrying Large Balances:
You should never accumulate large amounts of debt. Yes, keeping a large balance on a credit card can enable you to increase that cards limit. However, you need to be aware that your debt effects about 30% of your overall credit score.
Closing Credit Cards:
This may seem like a smart move if you are having credit issues, but the length of time you hold a line of credit also effects your credit score. If you are able to maintain a credit card for many years it looks much better on your credit as opposed to quickly paying off balances and closing cards.
Paying Late:
Nobody wants to see a late payment charge on their account and payment history is a major factor that lenders look into. For your FICO credit score, payment history makes up about 35% of the score.
Defaulting:
It may seem obvious, but failing to pay back an owed amount to a lender will severely damage your credit score. The largest form of default is bankruptcy or foreclosure on a home. Both of these situations can easily cut your credit score by 100 points.
Having to many lines of open credit:
This is when the age old phrase “to much of a good thing,” comes into play. Applying for a loan or credit card with numerous creditors can cause your credit score take a small hit. If you apply for multiple lines of credit at the same time, those little hits will add up quickly.
Not Having a Credit Card:
Many people are cutting up their cards and closing their accounts in hopes of helping to keep them out of debt, but this is a double edged sword. On the one side you are not accumulating more debt and in turn do not have to worry about payment. On the other hand, you are not showing payment/credit history and are not helping your credit. Having a small credit card that you use for something specific like fuel or groceries is smart to have as long as you are able to make your payment at the end of the month.
Co-Signing:
We all have friends and family we care about. There are times where those people may need our help to qualify to receive a line of credit. You must take precautions when choosing to co-sign on anything. If you are not fully capable of taking on that debt alone it may not be the best choice to help. You should always prepare for the worst and if for some reason the person you co-sign with is not able to make the payment it will become your responsibility. You don’t want to be faced with a collection agency looking for money from you because you tried to help someone out.

These are all great examples of what can hurt your credit score and things you should look out for. You should always be diligent about keeping up with your credit score and know what’s going on. Work smarter so you don’t have to work harder in the long run.
If you have any questions regarding a home mortgage or suggestions please feel free to email me at Ingrid.Quinn@CobaltMortgage.com or visit me at http://www.CobaltMortgage.com/IngridQuinn or http://www.ScottsdaleMortgageExpert.com