damage from changing a credit report

Messing With Credit Reports When Homebuying Creates Chaos

credit reports

Sacramento homebuyers checking credit reports while in escrow can spell disaster.

Well meaning Sacramento home buyers have messed up their credit reports to such an extent that we are now working on our third extension to close escrow. It’s not really the buyers’ fault. They are just doing what they believe is the right thing to do because either they were not informed or the communication delivered was unclear. Most normal buyers, if given the choice to screw up closing or close on time would choose to close on time. Unless they didn’t know any better. And if they didn’t know any better, I ask you, who is to blame?

I say it’s not the buyer. It’s also not the Sacramento listing agent, in case you’re wondering, because listing agents do not communicate with the buyer in a non-dual agency situation. That’s the job of the buyer’s agent and the buyer’s lender.

How Altering Credit Reports Can Create Disaster

The other problem is home buyers do not understand credit reports. They don’t know that when they close an account, for example, they could be affecting their FICO score. The score will probably go down. If their FICO score decreases, it could increase the interest rate they will pay. If the interest rate changes, that necessitates a new closing disclosure under TRID guidelines, put into place by the government last October. TRID overhauled everything you thought you knew about mortgages. A new closing disclosure delays closing.

To be safe, borrowers should never attempt to fix or update their credit reports without first speaking to a credit professional. What makes sense to regular person could be completely wrong. Credit is not simple. A credit professional such as your mortgage lender should be a guiding light for your home loan and can advise a borrower how to fix credit reports prior to obtaining a preapproval letter.

But once a home buyer is in contract to buy a home, all activity on that credit report should cease and desist. That means do not put any new purchases on a credit card. Do not close accounts. Do not dispute credit errors. Do not open new credit accounts. In short, do not touch your credit report.

In case you wonder, what’s the big deal? So what if escrow is delayed? Let me add that the seller is not required to close escrow after the period expires. In addition, if your interest rate goes up, a 1/4 point bump on a $300,000 loan means you will pay an additional $15,685.20 over the term of the loan. The safest thing to do is do not even look at your credit reports while you are in escrow. Don’t click. Fingers off the touchpad.

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