Improving Your Credit Score For A Mortgage In NYC

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Your credit score is based on five factors: payment history, amount owed, length of credit history, new credit, and credit mix.  Credit scores are calculated on a monthly basis (30-45 days) by Credit Information Companies, based on credit information provided by the lending banks and NBFCs.  A credit score is a three-digit number that rates your creditworthiness. Credit scores range from 300 to 850. The higher the score, the more likely you are to get approved for loans and with better interest rates. If you are thinking of buying a property with a mortgage or loan anytime soon, it’s time to provide some serious tender love and care to your credit report.

A good credit rating should be one of your personal goals.

Why?  What are the benefits of a good credit rating?  Think about these advantages: lower interest rates on credit cards, loans and mortgages, a better chance for credit card, loan and mortgage approval, having more negotiating power when applying for loans & mortgages, greater chance of approval for increased credit limits, easier rental approval, better car insurance rates, cellphone contracts without a security deposit, no-hassle utility hookups (no security deposits) and . . . bragging rights … a good credit rating is something to be proud of.

Why use a credit card?  Show the bank you are responsible.  This is the easiest way to establish a good credit score.  Ideally, you should use your credit card wisely and pay it off each month.  Alternatively, when making large purchases, be sure to make payments on time and above the minimum amount due.  This not only ensures a better credit score, it saves you $$$ in interest.

Don’t assume your credit rating is good.  Check your credit score every month.  Checking your credit score will not have an effect on it. Requesting a copy of your credit report or checking your credit score is known as a “soft inquiry.” Soft inquiries are not visible to potential lenders when they view your credit report. This way, you can make sure there are no errors on your credit score; studies have shown errors such as incorrect information related to your credit card details, identity theft, closed accounts reported as still active, your credit rating being linked to credit scores with a person with the same (or similar) name, and repeat listings of the same debt.  Keep on top of your rating to avoid financial complications and potentially embarrassing situations.

Payment history accounts for a whopping 35% of your score.  Don’t wait for the due date to pay your bills . . . pay them as soon as you receive them and use automatic payments whenever possible.  You might be tempted to close old credit card accounts when you’ve paid them off. Don’t do it! By keeping them open, you establish a longer credit history, which makes up 15% of your credit score.  Another important component to keep in mind is applying for credit.  Keep credit applications to a minimum . . . don’t apply for credit unless it is really necessary.  Why?  Each time you apply for credit, your creditor will run a credit check. This can drop your score by up to five points. It’ll also lower your average account “age”, which can decrease your credit score.  Someone who is frequently in need of credit assistance looks like a bad risk, like they can’t manage their finances … you really don’t want to fall into this category.  Getting a loan or credit increase when you have an urgent need will be difficult and costly so be sure to ponder the consequences before applying for credit.

If you find yourself with a low credit score don’t despair

There are ways to rectify the situation.  

In the U.S. the top three consumer reporting bureaus are Equifax, Experian, and TransUnion. You are entitled to a free copy of your credit report from all three major bureaus at least once a year. You can request them at the official website for If you find any errors, you have a right to challenge them, and the credit bureau is required to investigate.  By checking your credit score monthly, as mentioned above, you can catch any errors before they become a serious problem.

Applying for a mortgage?  Lenders use your credit report to get information on how reliable you have been at paying back debts in the past.  If you’re thinking of buying a home and want to improve your chances of being approved by a lender, you’ll want to make sure your borrowing history is in good shape.  A low credit score can decrease the possibility of obtaining a mortgage or, if you are approved for a mortgage, it will almost certainly mean a higher interest rate.  Be advised that applying to several banking institutions for a mortgage can, in itself, cause a lowering of your credit score as discussed earlier.  So . . . before you make an initial application check your credit score and resolve any discrepancies/disputes.  Don’t lose hope, speak with a mortgage broker and discuss your options.  Many times you can come to an agreement despite a low credit score.

A situation from my personal history may help you get ready for your first mortgage application.  I grew up in a house where cash was king.  My father, a heavyweight in the manufacturing business, had no personal credit cards.  He believed in paying cash and liked to unroll his wad of bills and peel them off no matter what the tab.  He was a big tipper and got great service everywhere we went.  My mother on the other hand used checks for everything.  I remember her keeping meticulous records in her check book and priding herself on never once being overdrawn or bouncing a check.  When it came time for me to head off to university on the west coast (we lived in Boston at the time) my parents had no need to lecture me about money.  I had been taught the value of it and the way to handle it.  But, being so far from home and not wanting to carry cash around the campus or deal with writing check, I applied for my first credit card.  I knew it was a device that could be a benefit or a curse so I used it with sagacity.  Thus began my credit history.  By the time I had graduated and put in five years as an environmental technologist, I was ready to buy my first condo.  By this time I had acquired credit cards from all the major shops I frequented in addition to my regular VISA and Mastercard.  I’d always prided myself on an impeccable credit score so I was shocked when the mortgage agent told me I’d have to consolidate my credit and reduce the number of cards I currently held.  Give up my Saks Card?  Do away with Macy’s and Lord & Taylor?  Just as cash had been king to my father, my collection of sleek little cards were precious to me.  Alas, give them up I did and, looking back, I can see how liberating and wise that was.

Fast forward about 25 years.  You would think that with all the financial wisdom I’d gained both from my parents and my own experience, I’d have been pretty savvy when it came to preparing my kids for their entry into the world of managing money.  But I made the mistake of giving them their own card through my account.  It felt so easy and I could keep an eye on their expenses and help them out financially as they embarked on their university careers.  Long after they’d both graduated they still only had cards in my name although they were paying them off themselves.  And then it happened, Jasmine, my eldest, went to the bank to get a car loan.  Let’s just say, it wasn’t pretty.  She called me in tears, “Mom!  How could you do this to me?”  I asked her to explain.  “Do you have any idea what it’s like to spend weeks looking for a car, finally finding the car of your dreams, filling out forms, negotiating a price, sitting there all elated and have salesman come back and say, “Sorry, but you have no credit history, we’ll have to reexamine the deal and see if our finance manager will agree to the terms.”  I was mortified . . . it really was my fault.  My good intentions had been entirely misguided and totally irresponsible.  My kids, responsible, trustworthy adults, were totally bereft of a credit history … no credit score!  I had done them a disservice that needed immediate rectification.  Thankfully, my bank manager issued them cards immediately.  In order to quickly build their credit score they made reasonable purchases and paid them off early every month so that they would have flawless credit scores and (although brief) a credit history.  Lesson learned!

Contributed By:

R&J Mortgage

Corporate Office: 80-02 Kew Gardens Rd Suite 1040, Queens, NY 11375


R&J Mortgage & Loan Brokers Manhattan NYC  31 W 34th St. #7162, New York, NY 10001  

Ready to lock-in the best mortgage loan rates in New York City Guaranteed? Call now for a free loan consultation. We provide lending services to residents of New York regardless of whether they have good credit or not. We offer income based and FHA loans as well. We have helped many who could not dream of attaining a mortgage secure a new home and fast. Contact us today and learn more.

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