The Chicago Patrolman Credit Union philosophy has long since focused on encouraging wise money management and that, of course, includes the understanding of credit scores. I think if you’re buying a home just to make your credit better that that’s the wrong reason.
However, if a first responder coming to us has previously had a mortgage and he or she paid it on time, that’s the first thing we’re going to look at. Paying a mortgage on time will absolutely help your credit score.
Just having credit and using it responsibly helps your credit. The perfect scenario for a first-time home buyer is somebody who has an auto loan and has paid on it for more than two years and has had a credit card and they’ve paid it on time for more than two years. Or maybe he or she has had a student loan in the past that was paid perfectly. Paying some type of installment loan on time on a regular basis also looks good from a credit standpoint for the first-time home buyer.
Obviously, for somebody who’s actively in a home now and they want to buy a new home, we’re going to look at the mortgage payment first. Then we look at the auto loan. Then we will look at other loan payments. That’s what our experts at Police Mortgage will generally do.
Your revolving debt has the biggest negative impact on you. If you borrow money on a mortgage loan, it’s a mortgage debt. It’s going to have a different impact on your credit score, both positive and negative. An auto loan or a signature loan is considered installment financing, versus a revolving account, which is a credit card or a line of credit.
At the bottom of the hierarchy is a revolving account that can be jacked up quickly. It could be a situation where you’re paying interest for life until you’re dead if you run up those credit cards. That’s pretty much the worst thing you can do, especially if you’re a law enforcement first-time home buyer.
At Police Mortgage and the National Police Credit Union, we advocate responsible use of credit. We understand that people have to drive, so they’re going to borrow money to buy a car. When a car loan is paid on time that’s absolutely good for your credit. And mortgages, of course, have the greatest positive impact to your credit when paid on time.
If you don’t pay your mortgage, you probably need to talk one of our partners like Gwen’s Helping Hands or use our complimentary services that are part of the Financial Planning and Education Center at the Chicago Patrolmen’s Federal Credit Union.
The practical side of credit and credit scores is that you need to borrow money but you don’t need to or have to over borrow. You have to be responsible with money and credit especially.
Now, one interesting question is “What is the definition of a first-time home buyer?” It’s somebody who hasn’t had an ownership in a home in the last three years.
So, it is possible to have people who bought a home 20 years ago. They sold their home. Then they rented for years. If they get back into the home market years later they are technically first-time home buyers again.
Some people declare bankruptcy. They’ve had problems in the past such as divorces. This is something we have deal with when it comes to police home loans. When they come back into the market three, four, five years later they’re first-time home buyers.
Fortunately, time heals all wounds when it comes to credit reports. If you didn’t declare bankruptcy or had a foreclosure, but you had some spotty credit in the past, you have to have at least 24 months of good-pay history when trying to obtain a mortgage.
At the end of the day, if you have perfectly paid on your car loans and your home loans that is going to be good when you come in for a police officer mortgage. When we pull a tri-merged credit report – that is TransUnion, Experian, and Equifax – we’re going to see all that. Things just become much more difficult if you’ve defaulted on a loan.
The most important thing to remember about financial literacy and education, is we’re all about wise money management. Don’t be afraid to come talk to us, whether it be in person or on the phone. Regardless of your situation, talk to us because Police Mortgage has the knowledge and the expertise to guide you.
Police Mortgage specializes in conventional mortgages, purchase money transactions, FHA loans, and VA loans. Led by founder and CEO John Aretos, Police Mortgage is known and respected for providing clients with exceptional service, customized terms, quick and easy closings, and low money down options. To learn more about Police Mortgage, call 312-499-8878.
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