Reporting Lines

Reporting Lines

Applying for a Home Loan – Make An Informed Decision

Learn How Reporting Lines Impact Your Mortgage Rates

The thought of purchasing a new home is exciting; but it can also very easily be a bit overwhelming. If you are looking to finance it with a mortgage loan, ensure your credit score supports your home-buying plans! Our personal services and attention to your personal detail are what make the process that much smoother and successful. 

Many first-time homeowners are unaware that credit reporting agencies utilize reporting lines on their credit reports to determine their creditworthiness and mortgage rates. Understanding how to improve your credit ratings will increase the chances of a favorable response and lower mortgage rates.   

The Credit Score

Credit scores are created through a software program--there is no mystery. A trade line or line of credit does not weigh in or count as valid until it is one year old. The opening of a new trade line is only negative when you do not treat it properly. When you open a new credit card, you do not want to charge more than 20% of the available balance. Also, you want to make your first payment on that balance as soon as possible so that it will report into consideration given by the score/ credit model. The credit model will look at your overall cumulative balances versus your cumulative amount of credit available.

Then, it goes to levels--how long is the trade line open? A trade line that is open longer can have a higher balance, and not upset the model. By opening a credit card, and having a high available balance, it will contribute to your overall “picture” in a more positive way. It will look at each credit card, how long they have been open, and how much is owed against it, and lastly, how many delinquencies you have. Any delinquency less than 2 years old will have a minimal effect. A current late payment of 30 days can cost you up to 40 points on your credit score. Some companies, after you bring the payment current, will allow you a one time courtesy of removing the late payment after you bring it current (make an on-time payment). 

Collections

Collections can report every month or they can report sporadically. Anytime that you make a collection or make a payment on a collection, you should make the request to have it deleted from your report. Some companies will, some won't, but if you do not ask it is NOT going to happen. If they do remove it, then you will receive the points back which you lost when the collection reported against you. Collections that read as a charge off on your credit report no longer contribute after the 2 years and are not considered as debt that needs to be paid off after the mortgage company. 

What are Reporting Lines?

Trade lines or reporting lines outline your borrowing activities, such as credit cards, lines of credits, car loans, etc. on your credit report. Each credit account has its own line and provides detailed information about that loan. This includes:

• The lender
• Type of credit
• Party responsible for loan payment
• Account payment status
• Late payments and range of days e.g. 30, 60 or 90 days 
• Total amount balance
• Any delinquency or bankruptcy filing

Even when an account is closed, it usually remains on your credit history for 3 to 5 years.

Simple Ways to Raise Your Credit Score

You need active trade lines to get a credit score. Factors like the number and type of trade lines, length of open accounts and payment history are used to calculate your score. Here are some tips to get more favorable scores.
  • Borrow and repay loans regularly to create a favorable credit history. Having zero credit reduces your creditworthiness.
  • Make all loan payments on time. Your credit history does not reflect paying rent and other bills unless you default.
  • Do not rack up a high balance or maximize the borrowing limit on your credit card.
  • Pay down your loan balances and credit card bills. 
  • Make smart and responsible use of your credit lines to maximize your buying power. 
  • Avoid checks from multiple companies as it tends to lower your credit score.
Reviewing your credit reports regularly and taking steps to tackle issues and fix errors months before applying for a home loan is the best way to ensure a positive response. At Dividend Mortgage, we offer numerous financing solutions and leverage our expertise to help you obtain the perfect fit.  

Call 269-321-8950 or contact us online to set up a consultation for a mortgage loan in Michigan. 
Share by: