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818 University Ave
Sacramento, CA 95825

Phone: (916) 736-3575
Fax: (916) 244-2697
Email: neal.smith@pcmloan.com

A few times a month, we send out useful articles and information to our clients and business partners. We would love to include you!

Do’s and Dont’s During the Loan Process

When you fill out a credit application, we run a credit report for the underwriter. Each leander and each loan program has different guidelines they must follow. You should not do anything that will have an adverse affect on your credit score while your loan is in process. We know it is tempting… If you are moving into a new home you may be thinking about purchasing new appliances of furniture, but this is really not the time to go shopping with your credit cards. You will want to remain in a stable position until the loan closes and give us the opportunity to help you lock in the best interest rate we can possibly get for you.

Here is a handy list of do’s and dont’s that you should adhere to after your loan application has been submitted to the lender.

Don’t apply for new credit of any kind – if you receive invitations to apply for new lines of credit, do not respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score. Likewise, do not establish new lines of credit for furniture, appliances, computers, etc.

Don’t pay off collections or charge-offs – once your loan application has been submitted, do not pay off collections unless the lender specifically asks you to in order to secure the loan. Generally, paying off old collections causes a drop in your credit score. The lender is only looking at the last two years of activity.

Don’t close credit card accounts – If you close a credit card account, it can affect your ratio of debt to available credit which has a 30% impact on your credit score. If you really want to close an account, do it after you close your mortgage loan.

Don’t max out or over charge existing credit cards – running up your credit cards is the fastest way to bring your score down, and it could drop up to 100 points overnight. Once you are engaged in the loan process, try to keep your credit cards below 30% of the available credit limit.

Don’t consolidate debt to one or two cards – once again, we do not want you to change your ratio of debt to available credit. Likewise, you want to keep beneficial credit history on the books.

Don’t raise red flags to the underwriter – do not co-sign on another person’s loan or change your name and address. The less activity that occurs while your loan is in process, the better it is for you.

Do join a credit watch program – Your bank, credit union or credit card company may be able to provide you with a free credit watch program that can alert you to any changes in your credit report. This can be a safeguard to help you intervene before the underwriter sees a problem.

Do stay current on existing accounts – Late payments on your existing mortgage, car payment, or anything else that can be reported to a CRA can cost your dearly. One 3–day late payment can cost anywhere from 30 to 75 points on your credit score.

Do continue to use your credit as your normally would – Red flags are easily raised within the scoring system. If it appears you are diverting from your normal spending patterns, it could cause your score to go down. For example, if you’ve had a monthly service for Internet access billed to the same credit card for the past three years, there’s really no reason to drop it now. Again, make your changes after the loan funds.

Do call your loan consultant – If you receive notification from a collection agency or creditor that could potentially have an adverse affect on your credit score, call us so we can try to direct you to the right resources and prevent any derogatory reporting to credit bureaus.