How to Improve Your Credit Score Before You Apply for a Mortgage

Auto-generated captions cleaned for readability. Sponsor messages, commercial breaks, and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page. Guest: George Hartmann of Credit Repair in 30.

Why nobody understands their own credit

Debbie: Welcome to Mortgage Mom Radio. I am Debbie Marcoux, I am the Mortgage Mom, and every week I bring you something different about all things real estate and mortgage. We haven't done this topic in quite some time, and I'm so happy he's here — I've got George Hartmann with Credit Repair in 30.

We talked briefly by email a couple of days ago. I asked whether there's anything new going on with credit that we need to be aware of, and you said nothing has really changed since 2020 — people just don't understand how important their credit is. Elaborate on that. Why is it so important to know your score, what's on the report, how many accounts you have, your balances, your credit mix, whether you're short in an area?

George: It's something none of us are taught. Everyone has to learn credit through wisdom, and unfortunately a lot of that means mistakes.

It takes me all the way back to my first credit card. I was in Florida, twenty-four hundred dollar limit, and by the end of the day — with my own calculations in my head about how quickly I could pay it off — I had new tires and rims on my car. True story. I figured on my salary, a couple hundred dollars a month, I'd pay it off within a year. That credit card went on for five or six years. The truck was long gone and I was still paying on the tires and rims, because I was never taught how to calculate what interest actually does.

So my credit always seemed to be average — 650 to a little over 700, right in the middle. Which means on every car and every mortgage and everything I did over my lifetime, I was not in control of what rate I was going to get. I've been fixing credit for over ten years now. I came out of the mortgage business — that's how Debbie and I know each other — and I started the company because I had my own issues to fix and couldn't find anyone who could get my clients all the way to a close.

The RV story: 711 to 791 in ten days

George: Here's what it looks like on the other side. I bought an RV a few years ago, in full control of my report and knowing exactly what was happening in every portion of it, especially the credit cards.

I knew I had a high balance on one card. So I told the RV company: do not run my credit. I am in charge of my credit, and I will tell you when you can run it, because there's a new balance about to hit my report that is going to gain me points. For today, just quote me a rate based on a 711.

They quoted me 10% down on about a $90,000 vehicle — so nine thousand dollars — at 5.49%. They waited ten days. My $298 payment on a $300 card posted. My score jumped to 791. I called them back and said, okay, you can run my credit today. They ran it, called me back, and asked whether I'd like my $500 deposit back — and my interest rate was 2.99%. Would I like to come pick up the vehicle? There was no argument. They just had to give me the best they had.

That's what we're talking about: never having to cross your fingers wondering if you'll qualify for something. What would you pay for a college education on the number one financial tool you possess?

Debbie: It's one of the most important things, and I don't understand why they don't teach it in school. They don't teach you to balance a checkbook, they don't teach you to file a tax return, and they don't teach you about your credit.

Myth: paying your statement balance builds your score

Debbie: I get clients who call and say their credit should be great, because they use the card every month and pay it off. But what they're doing is using the card, waiting for the statement, and then paying the balance — and they've been told that improves the report.

In reality, what matters is the limit of the card, the fact that you've used it, and the current balance as of the statement date. When that statement comes out and you get that email saying your new statement is available — whatever the balance is on that day is the balance that ends up on the credit report. So you want that balance paid off before the statement comes out. That's what updates the report to zero and brings the score up. Exactly like George's $298 payment that took him from 711 to 791.

Myth: leave a balance on the card

George: Leaving balances on credit cards is a very common one, and no one seems to know where they got that advice.

As long as you're active with the card, you're fine — and you can call your credit card company. They are your friend, they'll answer questions. Ask them how often you need to use it, whether there's any liability in keeping it at zero. Now, we're talking about A-plus cards with no monthly fee. If it's a newer card you're establishing and paying a monthly fee on, you can generally leave it at zero all the time, because they're not going to cancel a customer who's paying them a fee.

Here's the question I ask people: if you had millions of customers who carried a zero balance versus a ten or twenty dollar balance, what kind of money are we talking about in interest? That's where the myth comes from.

So check with your credit card company, find out the statement date, and pay your card in full about a week before that statement comes out. And especially if you're about to get a loan — pay your credit cards off 45 days before you go see your lender or let them run your credit. If you want to save money and maximize your score, pay those things off.

Understand that about 30% of your credit score comes from your management of credit cards. Three to five revolving accounts is what they're looking for.

The authorized user strategy

George: One of the biggest parts of a credit score is long-term history — I'm talking eight to ten years. So one of the practices we use, and it's a suggestion, is the authorized user strategy. Someone — a spouse, a partner, a friend — adds you to their account, and it shows up on your credit report.

This is my own story. I had rebuilt with two small accounts, a $300 card and an $800 card. The negative side was that they were new accounts with small limits — no history, just new. So I called a friend in Florida and asked him to add me as an authorized user on a couple of his cards.

The thing to understand is that you are the one at risk. If he runs up his balance or makes a late payment, that goes on my credit. So it needs to be someone you trust, someone whose credit is important to them too. I always say grandma, grandpa, mom, dad — somebody with a card being used for what cards are supposed to be used for, mainly emergencies, and paid off every month.

Debbie: It surely does work. I put both of my kids on a couple of my credit cards as authorized users. I've got a boat, cars, a home — everything running — and they have higher credit scores than I do, because those cards I've had for years immediately gave them ten, fifteen years of credit history. They're 18 and 20 and 22 years old.

We use it often. When a client calls who's borderline on being able to get financed, we'll ask whether a family member or a really good friend can add them to a card. And we're very specific: it has to be an account they've had for at least a couple of years, with a low balance and a high credit limit, because those pieces combined are what triggers the difference in the score. They get added, we wait 30 days, we pull credit again — and sometimes we'll see a hundred point difference. That's a giant difference in what loan we can get them, what rate, what program, how much money down.

Credit mix and the ceiling on your score

Debbie: What about mix? I get people asking how many cards they should have, whether they need a personal loan, whether they should have a store card.

George: For me personally, I don't have a mortgage on my credit anymore, which is a possible 50 points. So realistically the maximum I can achieve is around 800 — 850 being the theoretical max. Mine bounces a little over 800 now, and honestly a lot of that is just time. In the credit game, time is sometimes the only thing that's going to build those scores.

My goal for every client is 750 plus, and there is no doubt in my mind, based on hundreds of customers doing exactly what we instruct, that they can get to 750 in a 24-month period.

The two disciplines

George: If your credit is a hundred percent in order and rounded out, there are only two disciplines you need. The first: never make a payment late.

It's one of the most difficult things to get removed. It hurts you by 60 to 80 points and it takes two years to recover from one late payment. And it doesn't matter if it's a six-dollar monthly fee or a six-thousand-dollar house payment — it hits you the same. I missed a six dollar monthly fee on a credit card. I fought that and fought that. It was their fee, I hadn't charged anything, and they would not remove it. I had to wait the full two years. That was one of my setbacks four years into my own repair process — and I do this for a living.

What a 30-day late actually is

Debbie: Explain what a 30-day late is, because we get that call often. We have people who think they missed a payment and expect their report to be horrible — we pull it and there's nothing there, their credit is great, no problem getting a loan. And we see it go the other way too.

George: The amazing thing is how little people know about their own report, when all of that information is available to them.

A 30-day late is from the due date to 30 days past it. Here's where the discipline comes in, and this was an error I made too many times: my payment was due on the 10th, but payday was the 15th. I had a grace period — due on the 2nd, late on the 12th. I can pay a fee, ten or fifteen dollars, for being late. That doesn't hurt me from a credit standpoint unless I go a full 30 days.

And let me tell you, it's 30 days. Call on the 30th day and try to make the payment — it's automated, and it goes 30 days late. It's very rare that I see those reversed or removed. So set up autopay, or stay on top of your bills.

Debbie: Same with a mortgage. If your payment is due September 1st and you pay on September 15th, you get a late fee, but you're not reported to the credit bureaus until you haven't paid and it's October 1st. You have to go a full 30 days from the actual due date. But drive home what George said: you can't call on that 30th day and pay, because it won't post right away. It'll end up posting at 31 days and you still get hit with the 30-day late.

One thing people don't realize: you can call and, with a lot of auto loans and credit cards, have your due date changed. You might pay a couple of extra days of interest, but you can move it so it works with your pay schedule.

Inside a one-year credit program

Debbie: Talk about your program — how it works, what it costs, what you can get removed. What I love about working with you is that you're educating people, not just cleaning it up and sending them right back into the same place.

George: I've found that keeping it simple matters. People think it's complicated. It's really only about half a dozen things you need to understand.

It's a one-year program. And it isn't just for someone at the bottom of the barrel — I took on two clients yesterday with 711 and 718 scores. A married couple, 27 years old, having their first child. They said, we can qualify for a home right now, we could get a car right now, but we'd be paying higher rates — it's worth it to us to get educated. They'd pay that for four sessions at a college, and mine is a one-year program.

It's $399 for an individual and $600 for a couple. We have a 15-minute consultation on the phone, then I text you three steps — it takes about ten minutes to set up a profile, give me access to analyze your credit, and get started. From then on, every 40 days for a year, you get a full analysis, coaching and instructions on exactly what to do to raise your score based on what's on your credit as of that day. Anybody can get a free analysis from us. We never move forward and charge someone unless we know we can help them.

Debbie: I love the coaching aspect. If I know I have a phone conversation with you every 40 days, now I'm holding myself accountable, because you're going to see what I've been doing.

George: We deal directly with the bureaus on the negative items. The things we might ask you to do, based on the analysis, are: lower credit card balances over a period of time; open a new account — or specifically don't open a new account, because the inquiry and the new account will both lower your score, and in this particular case what we need is an authorized user instead. Authorized users are temporary. We use them only long enough for me to get you to the point where I can tell you to open a new account. It's baby steps. Honestly, I'm only on the phone with a client two or three times — the rest is email and instructions.

I call this qualify or quit. Either my clients quit the program, or they qualify, they go on to 750 and beyond, and then they pass that information to their siblings and their children so they don't make the same mistakes.

Why the score still decides the loan

Debbie: There was a huge blow-up about a year ago when they came out and said people with lower down payments and lower scores were going to get better financing. At the end of the day it isn't true. Did something change in our price sheet? Yes. Did it accommodate borrowers with a slightly lower score? Yes, it did. But you are still in far better shape on rate, program, and required down payment when your score is as high as it can be.

It goes across the board: better credit cards, better rates on those cards, higher limits. Recreational loans — RVs, boats — are difficult to get, and you get much better options the higher your score is. Your credit is everything.

Charge-offs, collections and deletion letters

George: The biggest thing after the homework is charge-offs, and especially charge-offs with balances. If there's a charge-off with a zero balance, there's a 60% or higher chance of removal. If there's a balance and the debt truly belongs to you, we can dispute it — but we have to play devil's advocate, because if they verify it, that's where the coaching matters.

One of mine was an $8,000 Visa. It came back verified. I was able to work with them: they had an amount they wanted, I had an amount I could give, and typically it's around 50% that they'll settle for. So it's a matter of settling — but I say don't settle a debt until you verify it, because there could be mistakes in there and you never know.

The other one, and again this is my own story: debt on your report that doesn't belong to you. I had a $328 account from a company I had never done business with in my life. I fought it for two or three years, and in the end I had to call and pay about $150 to settle it and get a removal letter from the collection company. The only person hurt that whole time was me, in the name of the principle that it wasn't mine. So sometimes my advice for cleaning up fastest is that you may have to pay something that doesn't belong to you, because you can't get anywhere with the bureaus.

Debbie: We pull credit constantly and we see a charge-off with, say, a $3,000 balance, and the client asks whether they need to pay it — it's nine years old, shouldn't it drop off?

George: Two scenarios. When an account goes late it usually runs 30, 60, 90, 120, 150 days, then charges off — which means the original creditor still holds the debt but has written it off. Say it's a $5,000 card. The fastest way anyone recovers from a credit challenge is to get it settled and closed as quickly as possible. The problem is that while it's still with the original creditor, they'll typically settle for around 50 cents on the dollar, but we haven't gotten them to offer deletion letters based on the settlement. So it goes to zero, it goes to closed, and now you're in recovery mode.

If the debt sits long enough it goes to a collection company — and there, especially since about 2020, we've seen collection companies allow settlement for about 50 cents on the dollar and offer a deletion letter. It's as if they never had the account in the first place.

So my advice: if you have collections, get them verified first, then get them settled as quickly as possible, whether they're in charge-off or collection status.

Does old debt really fall off?

Debbie: We get clients with a charge-off that's seven or eight years old who don't want to pay it, because they've been told it'll fall off in x amount of time. I get a little queasy hearing that, because we've seen that account get resold to a new collector and suddenly it's brand new again. When it's that old, what really happens?

George: There is not somebody at the bureau watching the clock on your particular report to make sure something gets removed at seven years. You have to be proactive. Charge-offs and collections are typically seven years; a foreclosure or a repo is ten. I have people who are in year six, a year away, who work with me anyway because they don't want year seven to go by without being proactive. You want the proper letter to go out, to the proper place, so it does get removed in the proper timeframe.

I had to change my mindset. I had challenges, but I got back on my feet, and basically everything I was responsible for buying, I got at 50% off. That's how I had to treat it. I couldn't just let it go away.

Debbie, I do have people call and say, I've got $27,000 in credit card debt and I need you to make it go away. That's not reality. That's not credit repair — that's Harry Potter stuff. There's a process. There's no magic.

Debbie: On the lending side, if somebody has an open collection or open charge-off, it generally needs to be handled through the close of the loan. It's a little different with mortgages: if it's an open collection and the aggregate is more than $1,000 total — whether that's one collection or several — we're going to require it be paid off. When it's a charge-off, we don't require it to be paid off.

Getting a single late payment removed

Debbie: What about a 30- or 60-day late? Are those relatively easy to get off, or a coin flip?

George: If you have a 30-day late, my suggestion is to call your creditor first and ask for a grace — do you have a one-time courtesy, I've never been late before. You probably have a 50-50 chance of removal on a single 30-day late. They're getting harder and harder. If you've had more than one in the last two years, or even more than one in the history of the account, the chances of removing it through the bureaus are slim — we almost never see it. Which is why you just make your payments on time, so you don't have to fight that two-year recovery.

On the removals we do get: zero-balance collections have a much higher removal rate, and time is your friend — the older the item, the easier it is to drop off. With a zero balance, they're not sitting there wanting to validate, because you've already cost them money, so a lot of times those fall off simply because the dispute doesn't get answered. Occasionally you'll get a major bank account that for some reason doesn't get validated. I always send a disclaimer with that: wait for two or three credit reports before we raise the flag or pop the champagne.

The truth about consumer credit counseling

Debbie: We get calls from clients who signed themselves up for a consumer credit counseling program — make us a monthly payment, we'll get your debts paid off, you won't pay any more interest. By the time they get to us their credit report is an absolute disaster. But for someone who genuinely can't come up with the money to pay debts off, that program looks like their only opportunity. What's your take?

George: It's a difficult one, because everyone is a little different. But think it through the life of an account. If you let that account go and you're paying less money to someone else for the debts of another company, it's almost double-compounded — they're going to buy your debt just like a collection company does, and they're going to charge your debt off. So you end up with a charge-off on your credit anyway. And even payment plans are tough, because the score doesn't change.

Debbie: Here's what we're seeing. People sign up because they can make the minimum payments but can't get ahead of them, and they see no way out. So they take what's advertised: make us one payment a month, we'll cut the balances down, we'll get rid of the interest. But it isn't debt consolidation — you're not getting a personal loan to pay the cards off and making one payment.

What happens is you pay them, and pay them, and they hold your money in an escrow or savings account. They are not making payments. So every month your report takes a 30-day late, then 60, then 90, then 120. They're waiting for the credit card company to get into enough of a pickle that it will negotiate. Then they settle, and yes, the debt does get paid off and the account does get closed. But if you had three or four or five cards running that cycle, by the time you're done you have a credit score in the high 400s. It's pretty bad.

George: The other option is the one I chose: leave them be. I wasn't going to be able to make the payment, so I stopped — but I knew that six months from then I might have the opportunity to settle for 50 cents on the dollar. So I started saving the money I would have been paying that company toward the settlement. Look at the timing: charge-off in six months, collection after that, and in a year I could settle for half and get a removal letter, versus a one- or two-year payment program with a debt consolidation company.

Debbie: But you were fully aware and prepared for your score to tank.

George: A hundred percent. It was already tanked. It doesn't take much more after your first few 30- and 60-day lates — it tanks and goes to one spot. And while that's happening you can be working the other areas of your report, the credit cards, the good stuff, so that a year or two down the road those items are a thing of the past.

Is it ever time for bankruptcy?

Debbie: Last one, and it's a doozy. Have you ever looked at someone's credit report and said it's time for bankruptcy?

George: No.

And the reason is the recovery. I've been down that road myself — it was so long ago I don't remember exactly when, for something like eighteen thousand dollars, and I felt like there was no way out. If I'd had the other approach, if someone had told me I'd need about seven grand a year from now and helped me put a plan together to get it, it would have been a lot easier. The recovery time from a bankruptcy is the hardest part.

Debbie: If you had $18,000 in debt and you stopped paying and put a couple hundred bucks a month aside, your credit is going to get destroyed because you didn't make the payments — but then you settle for half of what you owed and you can start to rebuild. Whereas in lending, after a bankruptcy you're looking at a minimum of three years, sometimes four. If you need a jumbo loan on a higher-priced home, sometimes seven years. And we have some jumbo and portfolio lenders that won't do a loan for you if you have ever had a bankruptcy in your lifetime.

So I see a much longer recovery from bankruptcy than from someone who just let the credit report go and had a pile of collections. But it does require being able to save the money to settle those debts. If there is absolutely no way to put money aside to settle any of it, then at that point bankruptcy is probably the way to go — a Chapter 7 clears the debt, you're not going to owe it. But the recovery period is brutal, and it's long.

Wrap-up

Debbie: George, thank you so much — we'll have you back, because this was great. If you want to know when I go live, text the word LIVE to 844-935-3634 — that's 844-WE-LEND-4 — and you'll get one text a week with the topic and a link to join. That's the same number to call the office. And you can always find us at mortgagemomradio.com. Talk to you all real soon.