While a mortgage lender in Michigan is going to look at your credit score closely at your credit report when you want to apply for a mortgage to buy a new home, they’re also going to look at the individual items on your report.  To get the most accurate picture they typically pull from all three credit bureaus.

What Michigan Mortgage Lenders Look For

If you have a less-than-perfect credit score, a Michigan lender looks at a number of causes in terms of what brings a score down or what affected your credit score.

Gaps in Payments

Your payment history on credit cards or revolving loans has the most significant impact on your credit score.  If you have a payment history that shows more than 30 days late it can be reported to the credit bureaus.  Late payments are the strongest indicator to a Michigan mortgage lender on how you’ll handle paying back a large loan such as a mortgage.

Debt with Credit Cards

If you have a high balance with your credit cards, it’s an indicator that you’re potentially living beyond the means of your income and relying on credit cards to cover regular purchases.  If this is the case it could mean that you might find it hard to meet your monthly obligation with a mortgage.  Subsequently, a high monthly balance reduces your overall credit rating.

Accounts Sent to Collections

Paying on all of your accounts is important and unpaid accounts can significantly drop your credit score when they show as negative.  While some types of accounts may affect the determination of a Michigan mortgage differently, having a trend of not paying accounts off can reflect poorly on your ability to repay a mortgage.

New Credit Inquiries

There are two types of inquiries on your credit:  Hard and Soft.  Soft inquiries are inquiries for things like background and credit checks that come from new employment or rentals – items to check your credit worthiness but not to extend you a line of credit.  A hard inquiry is typically a request for a credit line that you authorize such as a loan or credit card, line of credit, vehicle loan, etc.

Hard inquiries remain on your credit for up to 2 years and each inquiry can decrease your credit score by anywhere from 5 to 15 points.  That means it’s easy to have your score drop by 100 points or more with a lot of inquiries.  Having multiple hard inquiries over a short period, even within a year, can make you appear credit hungry to a mortgage lender and reflects poorly on your financial stability.

Before you start applying for new credit, paying off old accounts and tackling your debt you should first consult with a Michigan mortgage lender.  By contacting Ross Mortgage we can look at your credit through all the major reporting bureaus and help you develop a plan that will get you closer to an approval for buying a home in Northville, Novi, Canton or other metro Detroit communities in the future provided you cannot get approved now.