Credit Report Red Flags to Avoid

If you're trying to get a mortgage these days, you know a clean credit report is more important than ever. But simply having a healthy credit rating isn't enough. Even folks with good credit ratings can get dinged by lenders if they have any of these three common red flags, says personal finance expert Lynnette Khalfani-Cox of our sister site WalletPop.

If your credit reports are riddled with numerous late payments or major black marks -- like a recent foreclosure or a fresh bankruptcy filing -- it probably comes as no surprise that you'll have a tougher time getting a loan than someone with perfect credit.

But what about those of you who have decent credit ratings, or maybe even good credit? A solid FICO score alone frequently isn't enough to get a loan application approved, especially if other items on your application are sending up warning signs to a lender.

Here are three red flags -- on your credit reports and elsewhere -- that could cause lenders to think twice about extending you credit.1. Too many credit card accounts

What's the "ideal" number of credit cards you should carry? Frankly, no one knows. It all depends on what a lender is looking for. It's one thing to have a good mix of credit and an adequate number of credit cards from the standpoint of the FICO scoring system or another credit scoring model such as the VantageScore.

But it's another thing entirely to fit a lender's profile of an ideal customer. Banks often use their own customized, credit-scoring software. Additionally, they may judge your request for credit based on your overall "application score."

Whereas a FICO score focuses on elements like your payment history and outstanding debt balances, your application score will assess everything you state on your credit application, from how long you've lived at your current address to your income to the length of time you've been at your present job. None of these are factors included in your FICO score.

Of course, if you're trying to get approved for a credit card application and you've already got a wallet full of plastic, don't be surprised if you get denied on the basis that you already have "sufficient" credit. Sufficient to some banks means you have enough cards. Sufficient to other banks means you have enough credit in terms of your credit limits.

Either way, since lender guidelines vary based on each institution's risk appetite, it's not uncommon for a person deemed to have "sufficient" or "too much credit" by one firm to be judged as a perfectly safe lending risk by another firm.

Read the full story at Walletpop.

How to Examine Your Credit

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