The Top 10 Tips Durung The Loan Process 
 

Following are some helpful tips to avoid making the same credit mistakes that many borrowers

make during the credit enhancement and loan process:

1. DON'T APPLY FOR NEW CREDIT OF ANY KIND. Including those "You have been pre-approved" credit card

invitations that you receive in the mail. Every time that you have your credit pulled by a potential creditor or lender,

you lose points from your credit score immediately. Depending on the elements in your current credit report, you

could lose anywhere from 2-50 points for one hard inquiry.

2. DON'T PAY OFF COLLECTIONS OR CHARGE OFFS during the loan process. Paying collections will decrease the

credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it

through escrow, and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give

you a letter of deletion.

3. DON'T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account it will appear to the FICO that your

debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If

you have to close a credit card account, do it after the closing, and make sure it is a more recent account.

4. DON'T MAX OUT OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your

score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at

all times during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an

extra payment on all of your cards at the same time.

5. DON'T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do,

however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and

the system will penalize you as mentioned above in #4. If you want to save money on credit card interest rates,

wait until after closing.

6. DON'T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would

include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less

activity on your reports during the loan process, the better.

7. DO JOIN A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports weekly, or

even daily depending on the program you select. (When you pull your own reports, you don't get dinged for a hard

inquiry.) This way, if something does show up on your report that has caused your score to go down, you'll know it

immediately, and you may be able to take care of the problem before closing.

8. DO STAY CURRENT ON EXISTINGING ACCOUNTS. Like your mortgage and car payments. One 30-day late can cost

you anywhere from 30-125 points.

9. DO CONTINUE TO USE YOUR CREDIT AS NORMAL. Red Flags are raised easily with the scoring system. If it

appears that you are changing your pattern, it will raise a red flag, and your score could go down.

10. DO CALL YOUR BROKER if you receive something in the mail from a creditor or collection agency that you

believe may affect your score during the loan process. Your broker may be able to supply you with the

resources you need to stop any derogatory reporting to the bureaus.