Improve Your Credit Score?
Over the last several years loan decisions have become more sensitive to credit score.
- Sub-prime loans that allowed bad credit have disappeared. I can still work with a 580 score or better through FHA (On certain loans on a case by case basis)
- Fannie Mae and Freddie Mac have introduced tiered risk based pricing that makes it more expensive for each degree of lower score.
- FHA Tier One has raised its minimum from 580 to 640 middle credit score.
- Fannie Mae and Freddie Mac start penalizing you with risk based adjustments when the scores slip below 740.
When you apply for a mortgage we pull a credit bureau from the three main credit reporting agencies. TransUnion, Equifax and Experian. The middle score points us in the direction as to how we will treat your loan. If the scores are low I have a few tools that I can use to hopefully improve the situation.
The "What if Simulator" - This is an amazing tool that works especially well for someone with a lot of credit card debt. If you have say $1000 that can be applied to pay credit card debt down, the what if simulator will tell you which card to apply it to and how much should be applied in order to get a net result of so many points to that particular bureau. If I can boost your score 20-40 points it makes sense to take the time to do this step.
Make sure that the information each of the three credit reporting bureaus has on you is consistent and up to date. Order a copy of your credit report about once a year, and dispute any inaccuracies. If there is something incorrect, write to the three bureaus and ask them to delete the negative information. Do not dispute, delete. The rules are , the bureaus have one month to respond to your letter, and two months to either prove you wrong or remove the information. If you simply dispute, there will be a line item added to your report and nothing else will change.
If you do not have time to wait, we can do a Rapid Re-Check
Instead of waiting ninety days we can get incorrect information fixed in 6 business days. It is very important that we have substantial evidence that an item is being reported incorrectly. The Rapid Re-Check costs $40 per item, per bureau , per borrower. The information we submit has to be on the letter head of the creditor with a signature and a contact phone #. there are no guarantees on how much the scores will improve. Fixing an item that was reported several years ago , may have an adverse effect like opening an "old wound" on the credit report.
Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in the law though have made "consumer-originating" credit report requests not count so much. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. Unsolicited credit card solicitations in the mail don't count against your credit report, so don't worry.
The two main components of your credit score are your payment history and the amounts you owe. Bankruptcy filings and foreclosures, which can stay on your credit report for as long as 10 years, can significantly lower your score. It's never a good idea to take on more credit than you can handle.
Late payments work against you. It's extremely important to pay bills on time, even if it's only the monthly payment.
Don't "max out" your credit lines. Since the size of the balance on your open accounts is a factor, lower balances are better. Try to keep the balances less than 40% of the total high credit limit.
It's said that by carefully managing your credit, it's possible to add as much as 100 points per year to your score. I would be more than happy to advise you as to the best way to go. If you need to settle debts, I can help with that as well.
