Single purchase lifts credit score, saves money

Mortgage adviser: John Holmgren.

Purchase price: $1.2 million.

Loan amount: $960,000.

Loan terms: 30-year fixed rate loan at 4.25 percent interest with no points.

Backstory: Holmgren’s client was renting a property in Oakland’s Glenview District when the owner decided to sell the home to take advantage of today’s active housing market.

The tenant, a very successful Bay Area sports figure, wished to purchase the home. She had great income and more than enough savings to put 20 percent down, but the issue was her credit profile.

While her credit scores were excellent, she was not a big credit user. In fact, she only used one credit card on a regular basis and had a car payment.

To get the most competitive financing, it is important to have three active credit lines (definition: three credit accounts that have been used actively in the last 12 months).

At the very inception of the process, Holmgren could provide reasonably competitive financing, but knew the rate would improve dramatically if three credit lines were present.

He saw his client had an open credit account with a specialty retailer that had not been used recently. Holmgren suggested that she immediately make a purchase from that retailer.

She made an online purchase from that creditor and notified Holmgren. He then worked with the credit bureau to get her credit report updated to reflect this new credit event, which made her eligible for the best rate.

Many loan officers are blindsided by jumbo loan credit requirements, which are not always intuitively obvious or logical. Holmgren’s vigilance on this issue will save this home buyer a lot of money in interest over time.