Blemished Credit and the Pursuit of a Low Interest
Most Americans use credit to purchase goods and services.
Typically, the largest purchase most families make,
a home, is financed with a long term loan. From cars
to stereos and from clothes to Friday night dinners,
the use of credit is a common form of payment.
There are two major types of credit: installment and
revolving. Installment credit is generally issued through
financial institutions and is used to finance homes,
autos, education, etc. Revolving credit is issued by
banks and retail stores through credit cards. In most
forms of credit, the borrower agrees to make monthly
payments on the loan until it is paid in full.
Sometimes, consumers find their financial situation
has changed and monthly credit obligations have become
difficult to meet. A job loss, chronic illness, divorce,
etc. can all have an affect on an individual's ability
to meet monthly payment obligations. Most Americans
encounter difficult periods in their life that sometimes
result in tarnished credit. Tarnished credit is reflected
on a credit report as a slow payment history, collection,
bankruptcy, repossession, or foreclosure.
Contrary to the beliefs of many consumers, tardy or
tarnished credit does not necessarily preclude one from
obtaining a loan to finance a home. Many times an experienced
mortgage professional can help consumers with proper
strategy needed to qualify for a mortgage loan. Mortgage
lenders are in the business to make loans and will attempt
diligently to help consumers obtain a mortgage to purchase
Sometimes there may be an isolated blemish on an otherwise
good credit record. In these cases, the mortgage lender
will ask for a written statement explaining the reasons
for the late payment. If the explanation is creditable,
the infraction may not be held against the consumer.
In other cases, the credit problem occurred sometime
ago, but the consumer has reestablished credit. A letter
of explanation coupled with excellent current credit
may be more than adequate to meet home mortgage underwriting
What is important is for consumers to work with an
experienced loan officer to help determine your home
mortgage eligibility. A loan officer can review your
credit report and formulate a plan to bring the report
into compliance for a home loan. Sometimes a letter
of explanation with supporting documentation is sufficient.
Other times the loan officer may suggest you pay off
some debts and reestablished good credit over a period
of time before buying a home. The most critical time
period of your credit history is the proceeding twelve
Loan officers working for a reputable mortgage lender
are armed with an arsenal of mortgage programs with
varying degrees of credit grade requirements. Many times
loan officers are able to find a mortgage for a consumer
even if their credit is substandard.
The key is to not be discouraged and work with an experienced
loan officer in developing a strategy. There are many
ways a loan officer can help consumers work through
credit problems and ultimately help them obtain of mortgage.
The good news is that tarnished credit does not necessarily
mean the end of the world.