“My credit is excellent! I have, like, a 950 score!”
With such hyperbole (FICO scores range between 300 and 850) you’d almost expect this to be a quote from the president. But in reality, we hear such statements frequently in the mortgage business. And it makes perfect sense. With the proliferation of the Credit Karmas and Life Locks of the world, more and more consumers are staying attuned to their credit profile and generally speaking, that is a good thing. However, there is an important distinction to be made between having high credit scores and having a credit profile that provides the best chance for an approval on a jumbo mortgage. We’re going to cover this last aspect because, believe me, nobody knows jumbo credit better than me, and a lot of people have been saying… Just kidding. Let’s get serious.
And It’s Me You Need to Show…
As the title of this post suggests, credit depth can often be just as important as an acceptable FICO score. But what contributes to the depth of any credit report? First, there’s the amount of time over which credit has been established. For example, I remember my mom opening a joint (and secured) credit card for me before I left the nest. Effectively, I began establishing my credit as a teenager and even though that initial card had but an $800 credit limit, it worked to get my credit profile on the map. This is not a bad model to follow, even if you’re well out of your teens and already financially viable. Oh, and let’s not forget that those on work visas and green cards should also be keen to begin using US credit the day they establish roots in the states — at least if they wish at some point in the future to borrow for a home purchase.
The number of credit “tradelines” is also a factor when qualifying for a jumbo loan. Just what is a tradeline? It’s an individual liability; a car loan, a credit card, a student loan or a mortgage, for example. These will all “rate” on your credit report and each is considered a tradeline. A “trade” can be open or closed. It can be active or inactive (with the definition depending on each mortgage investor’s guidelines). Tradelines can be current or delinquent, and they can also be in dispute. So, yes, it’s complicated, but as a general rule, if you are seeking a jumbo mortgage we often prefer the following:
- Tradelines should have a minimum 2-year history.
- At least three open tradelines per borrower.
- Open tradelines should have activity in the last 12 months.
By accomplishing the above, we’d have a great foundation on which to build the credit component of any jumbo mortgage application. Then, combined with high FICO scores and no delinquencies or disputes, we’d be well on our way to qualifying, at least on a credit basis, for our best loan options.
When it comes to credit depth, credit tradelines and overall credit profile beyond FICO scores, I’m not cynical enough to believe that we’re living in a world of fools. But if you are in the market for a jumbo mortgage and you are attuned to everything we’ve covered above, you’ll have more options and likely, a better experience. This is one of the components of the loan process upon which I wish I could educate every prospect years in advance — and that’s the purpose of this post. If you have questions about any of these aspects, get in touch any time.
Vice President of Mortgage Lending
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