What Are Credit Tradelines?

I think I’ve made it clear before that I find no shame in talking about how hard we work for our clients. My assistant, Jamie, and I see a good number of mortgage applications come across our desks every week and in 2019 and 2020, a high percentage of them have been for jumbo home loans, which means that our borrowers must demonstrate strong credit depth by way of an adequate number of tradelines on their credit report. Gone are the days when one could just have a decent FICO score in order to cross credit concerns off of the loan approval list.

When we talk about credit tradelines and credit depth, most of the prominent jumbo mortgage banks like to see recent credit activity (that is, use of credit and timely payment) to consider any account active. And that’s really what a “tradeline” is — an account. An individual tradeline might be a mortgage, an auto or student loan or a credit card. All are different types of “trades” but in the case of revolving debts like credit cards, use of those cards in the last year or two is what really brings the tradelines into active status and works to meet the jumbo lender’s requirements.  By far, the gold standard for jumbo credit is three active tradelines with activity in the last twelve months, per borrower.

So in that spirit, I’m going to let you all in on a secret for getting a great jumbo loan if you are thinking that a mortgage application may be in your future in the coming months. Here are three GREAT ideas for taking that seldom-used credit card lurking in the back of your wallet or purse, or that forlorn department store card that you forget you had, and turning it into a bona fide active tradeline which, in turn, makes you eligible for the widest selection of jumbo loan programs.

1) The Starbucks Triple Mocha Frappuccino (Venti): $4.95

This frosty beverage will set you back both 500 calories and 500 centavos — but don’t you dare pinch pennies to pay this time. Instead I want you to reach for the least-used credit card in your quiver and rack this hefty charge on that piece of plastic. By doing so, you’ll bring this credit card to “active status” within the last 12 months and you’ll be on your way to both cardiac arrest and credit qualification.

2) Nashua Tape 1.89 in. x 120 yd. 300 Heavy-Duty Duct Tape (2-Pack): $10.88

Race fans! Hot rodders! Weekend warriors! Remember when you bought your house and your mother-in-law gave you a $100 gift card to Home Depot? Remember when you used it all plus another $400 on that initial visit and they convinced you to open a store card, take advantage of the discount and then pay the rest off later? Remember too that you haven’t used the card since that day twelve years ago? Well, now’s the time to repair everything in the house with duct tape. We already knew of its all-purpose abilities, so you’re burnin’ daylight, pardner. Get crackin’ on those DIY projects and the ‘honey do’ list and pick up a two-pack just in case.

3) The Warren Plaid Boxer: Now $15.00

One other thing that we know is that if someone is going to have a collection account on his credit report, and it’s going to be of the variety of which he’s unaware, it’s either going to be a medical bill or a Banana Republic store card (close third to a cell phone bill never received). I’m not sure why this is, but people go bananas over Banana’s billing. So let me help you save your credit shorts and get into a clean, fresh pair of undies while at the same time giving you an excuse to A) actually locate your Banana Republic card, B) place an order on it before they call you to tell you it’s been inactive since Marky Mark made skivvies the shizzle and, C) bring your store card to active status in the eyes of Equifax, Experian and Transunion.

My point(s) above are simple.  Active credit tradelines are a critical component to getting a great jumbo loan, but you can’t create them after you’ve applied for a mortgage. When we pull your credit report as part of the pre-approval process we’re looking at both credit history and recent activity but the time to address both is BEFORE you’re in the mortgage process. Or while you’re saving for your down payment. Or while you’re waiting for more inventory to hit the market, etc. Bringing your unused tradelines to active status is a little step you can take that will pay a big dividend later — opening up the widest array of jumbo options and, as a result, giving you access to the most competitive rates.  Let me know if you have questions about this aspect of getting a jumbo loan and I’ll be happy to help you craft a road map to success and hey, I might even let you in on a few more bargains as well…

Venti triple mocha frap for Ron,

Rob Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Your Credit May Be Good, But Is It Jumbo Good?

“I have an 800 FICO so I know I’ll qualify…”

We, here at Guaranteed Rate, pride ourselves on being a great jumbo mortgage lender. And because of my geography and clientele in the San Francisco Bay Area, we encounter a lot of higher loan amounts. Our rates are very competitive and we have many investors who can cover the needs of just about every jumbo loan scenario that can realistically be done these days. Moreover, we retain control of the underwriting, so we can exercise “makes sense” judgment and get files approved where many other banks and brokers cannot.

Yet, we are not immune to the quirks of the current state of jumbo mortgage lending and credit tradeline requirements definitely fall into the “quirk” category. A theme that will emerge here, and true to our opening statement, is that FICO score alone does not a jumbo approval make. As we’ll see, the credit requirements for jumbo loans reach beyond a borrower’s score and delve deeper into the components that comprise those very numbers, namely:

  1. Credit history — depth and age of tradelines.
  2. Blend of credit — distribution of open credit between mortgage, installment and revolving debt.
  3. Use of credit itself — how recently have accounts been used?

If you are in the market for a jumbo mortgage, it’s important to work with a mortgage professional early, as some of these requirements simply cannot be met in the time period it would take to close a traditional escrow. Let’s look at one jumbo investor’s credit profile requirements:

  • Minimum of 3 open tradelines with minimum of 12 month history for EACH borrower.
  • Authorized user accounts cannot be used to meet minimum tradeline requirement.
  • Credit depth must be a minimum of 2 years.
  • All 3 tradelines must have had current activity.

Or another’s:

  • Minimum 3 tradelines open and active for at least 24 months.
  • At least one of the three tradelines must be a mortgage or installment loan.
  • Remaining tradelines must be rated for 12 months.

So, a moral of this story might be that you may indeed have a very good FICO score. But if you do not demonstrate to a jumbo mortgage investor that you can produce a high score by way of the behavior that they believe will most likely lead to repayment of their loan, you may find yourself on the outside looking in. Remember, if you don’t like to use credit — if you pay cash for that auto, if you eschew credit cards — this can be highly effective financial behavior from a personal standpoint, but it can leave the mortgage lender in the dark about whether you’ve got the right credit curriculum vitae.

 

If you have questions about a jumbo home loan and/or about how your credit report and profile will be viewed by a jumbo lender, get in touch today. I can help you make sense of what it takes to qualify for a jumbo mortgage, and in many cases, we can find just the right investor to work with your existing credit profile. Your credit may already be excellent but we’ll make sure it’s jumbo good.

 

Rob Spinosa
Senior Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 – (866) 934-7283