When Your Credit Score Ghosts You Midway Through a Home Purchase

Did you know your credit score can disappear - even while you're in the middle of buying a house?

Yeah, that's right. At Galaxy Lending Group, we recently helped a first-time homebuyer who got pre-qualified with a solid 680 credit score. She was thrilled and ready to start house hunting.

But it took her about seven months to find the perfect home. No big deal - except when it came time to update her credit report, boom! Her score dropped to zero.

It sounds impossible, but this can happen because of the way FICO credit scores are calculated. When she first got pre-approved, she had just finished paying off all her debt and officially became debt-free. Normally, that's something to celebrate.

Unfortunately, FICO's scoring model doesn't see it that way. If you don't have any open or active credit accounts for six months, the algorithm stops calculating your score altogether. In other words, no recent credit activity = no score.

So in just seven months, this client went from a perfect borrower to a complete ghost. 👻

But don't panic - this isn't the end of the road for homebuyers. You can still qualify for a mortgage with no credit score, though it takes a little extra documentation and creativity.

In our client's case, we had her mom add her as an authorized user on a credit card. Within a short time, her score came back, and she was able to move forward with her loan.

If you're thinking about paying off all your debt before buying a house, talk to your mortgage broker first. Keeping at least one small active account can prevent your credit score from vanishing right when you need it most.

Call us to find out what steps you can take today to protect your credit and stay ready to buy.

Later, nerds.