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What to do if your Spouse or Partner has Bad Credit

Credit can make or break your home loan application.  A high credit score can cover many of the blemishes one might find on a mortgage application.  On the opposite end of the spectrum a High Income, a big down payment or other Strength’s can’t make up for a terrible credit score.

additionally a higher credit score often gets you better Mortgage Rates and Terms.

But what do you do when you have excellent credit but your significant other doesn’t?

This is a common problem but the experts at Plattsburgh Mortgage overcome problems like these every day.  Even when your partner has poor credit you may still be able to buy your dream home, or refinance your current one.
Understanding How Lenders Calculate Mortgage Scores
The first step to getting approved is knowing how lenders view two borrower applications.  Lender’s don’t Average out the scores from the two applicants, they use the lower mid score of the two borrowers.  The example below should help you understand

Each borrower has 3 scores, one from each major credit bureau.   The lender uses the middle score for each borrower, after that you take the lower of the middle two scores.

Borrower 1        Borrower 2

Credit score                     620                      715

  640                       730

  615                        750

The bolded score above is the lower mid score and 620 is the number the lender will use for qualifying purposes.  Luckily their is a number of Strategies that can help if your significant other has a credit score that may not qualify

Know what is reporting to your partners Credit
Sometimes Creditor’s make mistakes which negatively effect credit scores.  Knowing exactly what’s on your credit report and why the scores are low is a great place to start.  Today consumer’s have numerous easy ways to obtain a copy of your credit report.  All Bureaus’ allow you to get one free copy per year.  One error could cost you over 100 points.
Another strategy is to pay down credit cards.  If you are using too much of your credit card high limit it will negatively effect your score.  Keeping your Credit Card’s at or Below 30% of their high limit is a great way to boost your credit score.

Another way to have an immediate positive impact on your spouses credit score it to add them as an authorized user on a good standing credit card that belongs to you or someone else you both know.

Add a Co-Signer
Having a Relative or friend who can co-sign on the mortgage can be exactly what you need to get qualified.  A co-signer is someone who agrees to take on responsibility if you cannot pay back the mortgage.

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