Imagine the anxiety of watching your credit score unexpectedly plummet after spending your entire adult life maintaining good credit.
Now suppose this credit decline blocks you from getting a mortgage on the house you planned to buy.
That’s precisely what happened in this story, and it happens to mortgage applicants all across the country with surprisingly frequency.
All too often the culprit is unpaid phone bills. In this case, his cellphone provider sent the account to a collection agency after being just more than a month late on its cancellation fee. That caused his credit score to drop like a lead pickle, approximately 80 points (out of a theoretical 900) virtually overnight.
It never should have happened that way. Collections are meant for people who can’t or don’t want to pay their debts. But sometimes, for one reason or another, people honestly don’t know they’ve missed a payment. Reputable creditors make bona fide efforts to contact debtors for payment before taking this extreme measure. That didn’t happen here.
As a mortgage broker, I see this time and again. For most borrowers, it’s just a simple oversight. But as this case shows, an unnoticed cellphone charge can spell credit-score disaster. By the way, I learned the hard way that when you cancel your account, some phone providers stop automatically billing your credit card and e-mailing you outstanding charges. How thoughtful of them……
To continue reading & find out how to avoid credit drama just like this, click here (story via Globe & Mail)
Truth: Your credit rating is not the only piece of the mortgage puzzle but you need to know where you stand.
I have been in the mortgage business for a long time and still, the most common question that I get asked is plain and simple……
“How do I actually get a mortgage with bad credit?”
I get asked this a lot and my very BEST ADVICE is NOT TO MAKE ASSUMPTIONS. Many people think they have poor credit from something that happened years ago and are pleasantly surprised to find out the item in question is no longer pulling their credit down. Conversely, many people think they have good credit only to find out that parking ticket or phone bill they didn’t agree with nor pay, is costing them dearly on their credit report!
Here’s what to do:
- let me check your report out so you know exactly where you stand. (Free)
- If you do have some serious problems, let me give you some tips on how to improve your situation, if not for now, for a future application (Still free)
- You would be surprised how many mistakes I find on credit reports; things that have been paid off long ago but aren’t logged on the credit report – Again never make assumptions….
If your curious to know your score, give me a shout if there are improvements to be made, you would much rather tackle those now than have a nasty surprise later 🙂
I would just like to lead by saying, your mortgage payment doesn’t always show up on your credit report, but where it is going to bite you (if you are late on multiple payments), is at renewal time & it will hit you right in the pocket……
If you miss three consecutive payments or more in a row, it will lead to foreclosure proceedings (yuck), which is when the bank or lender starts the process of legally taking ownership of your property due to the lack of payments. Believe it or not, banks or lenders don’t want to own your home, but if the lender isn’t getting paid, it will try and sell the property in order to reduce its losses. Foreclosure shows up under the public record portion of your credit report……
You may assume that bankruptcy is the worst thing you can do for your credit; however, if you are applying for mortgage financing, going through a foreclosure is the absolute worst thing you can do for your credit. Bad consumer credit can be rebuilt fairly quickly, but very few lenders will look at providing financing for you if you have a previous foreclosure showing up on your credit report, regardless how strong your current credit is.
If you find yourself in a situation where you may not be able to make your mortgage payments, contact your mortgage lender or mortgage broker to find out what can be done. In all my years in the mortgage biz, I’ve never seen the attitude of pretending it will all go away actually work for anyone.
As always, if you have any questions about the mortgage industry, never hesitate to get in touch 🙂