1. Not leaving enough time to fix errors. Consumers should review their credit report at least once a year. Inaccuracies aren’t uncommon, and it takes time to set the record straight. Each of the three major credit reporting agencies—Equifax, Experian, and TransUnion—provides one free credit report per year (https://www.annualcreditreport.com/cra/index.jsp). There’s a charge, typically about $15, to see the actual credit score, but the cost is worth it.
2. Changing spending behavior. A surprisingly good credit score can tempt prospective home buyers to open credit card accounts or take out a loan for a new car. Such actions can damage their credit score during a critical time, making it harder to obtain the loan they want.
3. Seeking a subprime loan. Even those with a marginal credit score can qualify for conventional loans. Tell customers to apply for the best mortgage loan they can find and to remember that other factors besides their credit score, such as the size of their down payment, come into play when applying for a loan.
4. Confusing “prequalifed” for “preapproved.” Prequalification doesn’t require the lender to verify income and means very little in terms of a consumer’s ability to obtain a mortgage. Encourage customers to get preapproved, a process in which the lender checks employment history, income, and bank funds, and reviews the credit report.
5. Forgetting about credit after the purchase. Your customers moved into their new home, happy they’ll never have to worry about credit scores again. Not so fast. If they decide to refinance or move, their credit will once again take center stage. Remind customers to keep their credit score in mind as they deal with the expenses of being a home owner.
Source: David Reed, CD Reed Mortgage Bankers, Austin, Texas, author of Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan (AMACOM, 2004)
Reprinted from REALTOR. Magazine, published by NATIONAL ASSOCIATION OF REALTORS. Copyright 2006. All rights reserved.