Suppose you were just a month late paying a bill a couple of months ago (the bill got lost in your desk). When it comes to your mortgage application, that's not such a big thing, compared to a bankruptcy or people who have a history of late payments, is it?
Stories Affecting Your Mortgage Application
A woman donated a car to charity five years prior to our running her credit report in connection with qualifying for a loan. The deed wasn't correctly changed (check with the DMV when you transfer title!), and at some point the car was towed and the new owner failed to pay the towing fee. That fee, plus hefty collection charges that were tacked on, totaled about $1400.00 and went straight to my client's record.
Another client co-signed for a relative who was applying for a credit card. Turns out the relative didn't make the card payments, and our client's credit rating took a hit, complicating the process of getting pre-approved for a loan. Imagine how bad things could have gotten if they were the straw buyer for their relatives!
And another client got a speeding citation but changed residences before the ticket arrived in the mail. He got busy with life and somehow forgot about the whole incident. Unbeknownst to him, the ticket went to collection, and his credit score took a hit. He didn't find out about it until he was house hunting and needed to qualify for a loan. The upshot: we had to submit the loan to three different lenders to get approval, a process that took three weeks rather than the typical ten days.
Other common problems include medical disputes, cell phone company disputes, and missed payments on student loans (the student loan deferment process is tricky).
What About That Late Payment?
That one recent late payment may be worse, depending upon timing! Three consecutive late payments three years ago have less impact on your credit score than one late payment last month. And a bankruptcy five years ago has less impact than a current 30-day-late payment. Why? Because recent problems may be the start of a trend. What's your trend if your bankruptcy was years ago and you've had a perfect record since?
So what can you do? Avoid credit surprises by monitoring your credit report on a regular basis. It's like going to your doctor for an annual checkup: the sooner you discover an infection is creeping into your system and begin treatment, the easier it is to get cured. Whether or not you're buying a house or planning to refinance, check your credit regularly. If you are buying or refinancing, it's critical that we check your credit report as early as possible so you have: time to correct errors and improve your credit score.