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Chrisman's Corner: Sometimes Borrowers Need to Be Reminded about Credit

JMAC AEs & staff tell our brokers that it’s important how their credit behavior may affect their ability to obtain a mortgage as credit is one of the major factors lenders look at when qualifying a potential buyer. 
 
Credit reports are compiled by three different credit reporting agencies, which are then analyzed and evaluated to obtain the credit score. Many factors affect a credit score such as payment history where a consumer’s account is separated into installment and revolving debt. This portion comprises 35 percent of the score and includes short sales, foreclosure, deeds-in-lieu and derogatory accounts. 
 
JMAC’s brokers know that payment patterns can also be used to analyze a borrower’s ability to repay. Another section of the credit report is the amounts owed, which is 30 percent of the score. This includes the total amount of debt owed but also how much of the maximum limit is being used. If more credit is used out of the maximum amount available the more the score will lower. Length of credit history is also looked at, which accounts for 15 percent of the score. 
 
Our experienced brokers know that the longer the consumer exemplifies satisfactory and responsible credit, the higher the score. New credit comprises 10 percent of the credit score and new credit applied for during the last 6 months will appear on a report and may lower the score. New lines of credit require a consumer to provide a written explanation when applying for a mortgage.