Can you improve your score by commingling?
I was interviewed for a blog post at Ross Mortgage below is a copy of the blog click here to see the original
Love is in the air, and with peak home buying season just around the corner, couples looking to get cozy in their own home should start setting themselves up for a smooth and successful mortgage application process. While cupid doesn’t ask for credit scores on his matchmaking application, mortgage lenders do.
I recently talked to Dave Sullivan, marketing director for credit technologies and a valued partner of Ross Mortgage Corporation, to discuss how couples’ credit scores affects their ability to obtain a mortgage loan. Whether you recently got married or simply want to move in with your mate, Dave shared some great advice for lovebirds looking to purchase their dream home.
Although credit scores are only one of many factors lenders use to determine creditworthiness, they have a significant impact on your ability to qualify for a mortgage loan and obtain a decent interest rate. While there is no such thing as a married or joint credit score, your partner’s personal score will have an effect on the mortgage application process.
Both people in the relationship have their own individual credit report that contains a total of three FICO scores, one from each of the three major credit repositories. Mortgage lenders will typically use the middle score of the person with the lowest overall credit score to determine the pre-approved credit limit and interest rate.
Although most mortgage lenders typically require applicants to have a minimum credit score between 620 and 640 to even qualify for a loan, the higher your credit score is, the lower your interest rate will be. If your significant other’s credit score is less than satisfactory, there are some things you can do to help them boost their score and improve your chances of qualifying for a mortgage loan with a great rate.
Before you and your special someone begin searching for your dream home, you should look up both of your credit reports and focus on paying down your revolving balances. Often times, a five to ten point change in your credit score can have an impact on the interest rate you qualify for. To look up all three of your actual FICO scores that will be used to close your loan, fill out the Mortgage PreFlight application through the Team Pascarella Facebook page. It’s a secure program Ross Mortgage provides to its clients that streamlines the pre-approval process and provides you and your lender with instant access to your credit report.
If your partner is plagued with a poor credit history, you can help them improve their score by adding them as an authorized user or joint account holder on one of your credit card accounts. Since FICO scores are determined by factors such as age of credit history, payment history and level of debt, you should put your partner on an account you’ve had for a long time that has a low credit balance. Your credit history for that account will be transferred to their credit report, thus improving their credit score. If you’ve lived with them for at least six months, you can also apply for a joint credit account where each of you can begin establishing good financial habits as a couple while also building each person’s credit score at the same time.
If you’ve found your dream home and can’t wait, you can also try applying by yourself as the sole mortgage holder and list your significant other on the deed when the loan is closed. However, if you choose to take this route, only your income will be considered during the approval process, which could limit the number of lending programs available and lower your pre-approved credit limit.