We are not
credit counselors, but are happy to extend these
general, credit tips. Credit repair can take time, but
it is worth the effort because you will get approved for
lower interest rates and an easier loan process with a
good credit record:
Introduction
to Credit Reports:
In
the mortgage approval process, when we try to
pre-qualify you for a mortgage loan or actually
underwrite you loan, your credit reports play a very
large part. Credit reports show any or all of the following
information: Your name, and address and social
security number. There may be references to other
names (ie: maiden name) and addresses you have used.
Sometimes your employer, employment date(s) and birthday
are listed. Credit information that is listed can
include: Open and closed accounts; collection accounts,
accounts "charged off" (meaning the creditor
has assumed they are not likely to ever be paid),
repossessions, judgments, bankruptcies, foreclosures.
They usually show all credit inquiries within the last 2
years. Usually the account information includes
the date the account was opened, date it was last
updated, dates of delinquent payments, present or last balance, the credit limit and
high balance, monthly minimum and amount overdue and
credit scores.
Credit or "FICO” Scores:
Credit scores, commonly called “FICO” scores
(a FICO score is actually just one of the scores), are
a component of a complete “mortgage credit report”.
The scores are created from your raw credit data by
using complex formulas that are all developed by the
Fair-Isaac COmpany (Hence, "FICO"). The
scores vary from each of the 3 major bureaus because not
every creditor reports to each bureaus. Also,
while the scoring "algorithms" are all
developed by one company, they are varied for each
bureau depending upon the amount of emphasis each bureau
wants to place on the items that make up the
score.
Credit
scores are becoming increasingly important in the
loan approval process as a means of stating a person’s
credit-worthiness. They
are especially important in the qualification process for
non-government (FHA/VA) loans.
You
can read more about by clicking here.
Keep this in mind
regarding credit scores: You do not need to
maintain a credit balance to maintain a credit
score. But you must use your credit
periodically...even if you pay the full balance off each
month. If you do not do this, a credit report may
show no score even if your credit history is
spotless!
How
We Use Your Credit Information: Bear
in mind that we are acutely conscious of the sensitivity
and confidentiality of your credit information.
Before we access it, we require that you authorize us to
do so. Then, after the information is in our
hands, we are extremely careful to maintain your
financial privacy. You can read our privacy policy
here.)
Some
reports have more information than others because not
all creditors report your accounts to every
bureau. Also, the
bureaus don't share information with each other, so their reports
will contain different information. Finally, the
formulas used to create credit scores vary between the
bureaus...so the scores will vary even if their base
information on you is identical. Sometimes,
we will only pull one bureau report, called an
“in-file” credit report, especially if we have been
warned that your credit is poor. But, because we
want to
have a rounded picture of your credit habits and
history, we usually pull a report that is a merge of
each of the 3 major bureaus information. We will
analyze it to verify that you have enough credit
history, identify obvious errors, determine what
individual accounts can be improved and which accounts
may need to be paid in order to qualify for a mortgage.
When you actually, formally, apply for a mortgage
we may obtain a “full-factual” credit report, also known
as a “residential mortgage credit report” (RMCR), in order to save
time, if their are corrections that need to be made.
An RMCR credit report starts as a composite, or merge, of 2 or 3 of the major credit
bureau's reports. Lenders allow us to use
an RMCR because they realize that it can take quite some
time to correct the source reports from which it is
created. Without RMCR reports, it could take many
months to clear up your source credit records with each bureau
and obtain your loan. The company that supplies this report to us will
interview you by phone and verify your debt, mortgage (or
rent) and employment by phone. They
are willing to cooperate with you and us to clear up
various discrepancies so to help us approve your loan. Please be
aware that changes to the “RMCR” do not affect the contents of your files on the major
bureaus, at least not immediately.
After
examining the “in-file” report, we may mention that
your credit record or credit score needs to be improved
before we can get you approved for a mortgage loan. If
you are unsure how to work with your creditors and the
major credit bureaus, we can direct you to work with a
credit information company that is experienced in these
matters. A credit information company does not pay your
debts for you. It is merely a means to correct your
records and advise you as to which steps are most likely
to improve your credit rating.
You
can try to improve
your credit situation and clear up discrepancies by working directly with your
creditors and with the three major credit bureaus or
repositories: CBA/Experian
(formerly TRW), Equifax
(formerly CBI) and
Trans-Union. You
can find some of the steps it may take to correct your
credit
below.
Getting
Your Credit Report & Scores: You
will need a copy of each credit bureau (a/k/a credit
repository) report before you can deal with them.
The report must have been issued by the bureau, and not
from a third party report provider. Without having
the appropriate report number, you will never even get
thru "telephone hell" when you try to call
them.
If you have
been rejected for a loan, the lender must give you a
letter to that effect. That letter will serve to get you
a free copy of your credit report from the bureau(s) on whose
reports the denial of credit was based. Otherwise, each
bureau will charge you $3.00 to $15.00 for their report
of your credit.
Please
note that you are also entitled to one free
credit report, from each bureau, per year. To get that report
online, you must go to this website http://www.annualcreditreport.com
You can also call 1-877-322-8228 to request your credit
reports by phone. You will go through a simple
verification process over the phone. Your reports will
be mailed to you.
Be
cautious about "free credit report"
offers. Most of these offers give you one report and
score, but enroll hope to enroll you in a monthly-fee program that may or
may not be cost effective. It costs them a few dollars to
get your report, but their programs will be charging you
$5 or $10 per bureaus, per month, for those reports.
Just be sure to learn exactly
what you are signing up for before accepting these offers.
There
are many credit repositories in the country, but the
following three companies are the ones used by most
lenders to rate your credit. If
you want to try to work with the major bureaus to correct your
credit record, here are theirs current
addresses and telephone numbers. As mentioned
above, remember that it is difficult to contact a
"live person" at a bureau without having the
reference number from a report supplied that bureau:
CBA/Experian
111 Woodcrest
Road
Cherry Hill,
NJ. 08034
800-248-0470
800-854-7201
(Nat’l-Tx) |
TransUnion
Corporation
760 Sproul
Road
Springfield,
PA. 19064
800-888-4213 |
Equifax/CBI
Peachtree-Dunwoodie
Rd.
Suite 600
Atlanta, GA
30374-0241
800-685-1111
|
Address your correspondence to
the Credit Dispute Department.
What
Hurts Your Credit?
Here,
from real bad to not-so-bad, are the problems that hurt your
credit and your chances for being extended more credit. Also
listed are the reasons why they hurt you, from the
perspective of a future
creditor, with some comments on each
problem. Some lenders will allow older (ie: 2 years or
more) derogatory items to remain on your record, but many
will not. In other cases, there may be a dollar limit
that may remain, but amounts over that limit will have to be
partially or completely paid off:
Foreclosure
-- The worst problem, Seems to show that you already
"blew it" when someone trusted you with a
mortgage.
-
In
general, because most lenders consider it to be
"throwing good money after bad" to make a loan
to a person with a foreclosure in their past, most
lenders require at least 3 years before considering a
new loan to them. You should never let payment
difficulties get to the point where your lender files
foreclosure documents against you or the sheriff
actually auctions off your property.
There are some extreme mortgage
scams that prey on people in danger of being foreclosed
upon. In you are in that situation,
Contact
Us Now!
We may have a legitimate solution to help you save your property, if a
foreclosure is looming on the horizon. We can't help
everyone, but it is certainly worth calling, writing or
sending an email
to us.
Bankruptcy
-- A "BKR" seems to demonstrate that you voluntarily managed
your finances so badly, lived beyond your means, etc., that
you needed government protection to salvage your finances.
-
Without
justifiable reasons, bankruptcy used to mean a wait of 2 to 4
years after the date of the discharge before anyone
would consider giving you a mortgage. With good
justification, it meant a wait of 1 to 2 years. That is
still the case with conventional and government
loans. On the
other hand, there are now alternative lenders that will
loan money even ONE DAY out of bankruptcy and it is very possible to get a mortgage prior
to discharge of a Chapter 13 (repayment plan)
Bankruptcy. Ask us for details.
-
Late
payments after a bankruptcy, for the 10 years that
they remain on your credit report, hurt badly! The very
worst thing you can do after a bankruptcy is pay
your mortgage and other debts late or have a poor rent payment history. A very justifiable reason for
derogatory credit after a bankruptcy (such as
involuntary job loss or health problems) may be needed in
order to qualify for a mortgage. Even if you are
approved, the derogatory credit
may boost your down payment requirements and interest
rate. It may be a bit easier to qualify for an FHA or VA
loan, but not much easier. It is always a challenge to overcome
post-bankruptcy credit problems. Lenders tend to
look at this as proof that "you didn't learn your
lesson."
-
Potential
mortgagors (you) generally need to show that new credit has been issued to you
after the bankruptcy in order to be approved for a new
loan...even if it consists of secured credit cards
(cards which require a deposit in the amount of the
credit limit). You must also use the credit and pay
promptly. What you are doing is showing that you have
used the "second chance" given by the
bankruptcy, can now handle credit wisely and are no
longer a credit risk. Mortgage lenders don't want
to be the first to extend you new credit after a
bankruptcy.
Repossessions
-- A repossession seems to show that you couldn't handle a fairly
large recurring debt. If there is still a balance owed that
is not on a payment plan, it seems to show that you have no
concern about repaying the debt.
-
There
are two major problems with a repossession: First, it is a
default on a large loan -- usually second, in size, only
to a mortgage or rent payment. Second, most people don't repay the
balance owed or get on a repayment plan. Voluntarily
giving the vehicle back usually doesn't eliminate a
balance owed. A repossessed vehicle is usually auctioned
off and the auction often yields less than the balance owed on your loan. You owe the
difference between that balance and the auction amount.
Unfortunately, you may not even be aware that there is
still a balance due on the vehicle that you no longer
own. To mitigate the effect of the repossession, you may need to repay the balance owed, negotiate a smaller
payoff, if possible, or get on a repayment plan and show
6-12 timely payments. In some cases, if the "repo"
is old enough, a lender may approve you for a mortgage
with the debt remaining unpaid.
Judgments,
Charge-Offs, Collection Accounts, Balances on Accounts
Closed by the Creditor
-- Aside for the fact that a debt
wasn't repaid, these also seem to show a lack of
concern for ever repaying the debt because you
allowed them to go so far.
-
As
with repossessions, mortgage approval may require that you
pay off these debts, or get on a repayment plan and show 6-12 timely
payments. Some of these debts will vanish from your
credit report after a number of years. Make no mistake
though, you still, probably, owe the debt and there are
a number of ways for the creditors to make them reappear
on your credit report. Some mortgages will ignore old or
small delinquent debts...but the interest rate will be
higher than normal.
Late
Payments
-- If more than
occasional; not confined to an
explainable period; and recent as well; late payments seem
to show sloppiness in your finances, erratic ability to
repay (maybe because of fluctuating income) or lack of
concern for repaying debts in general.
-
These
are easiest to handle because the creditor has not
reached the point of denying you future credit by
closing your account or taking further action. Bring
them current or contact the creditor and tell them
you want to do so. Make whatever repayment arrangements
with the creditor that you can to keep the account from
being closed. It is always better to contact your
creditors, if you must be late, than to "bury your
head in the sand" and simply pay when you can.
NOTE:
Why did the above section say SEEMS TO SHOW over and
over again? Because credit bureaus and lenders routinely
make assumptions about how you will handle credit in the
future based on your past. BUT, you may have had totally valid
reasons for your credit problems. Those reasons may be so
justifiable, that you can still get a loan without too much
problem. If you think that your credit problems may be
justifiable, Contact
Us.
One of our loan officers may be able to show you how to get
the loan you want in spite of the past problems. No credit
problems are eternally insurmountable. Even if, in a worst
case scenario, no loan is possible now, it rarely takes more
than 6-24 months of credit repair to become eligible for an
affordable mortgage. So contact us now! We
are willing and able to
help you make a plan for the future, if you truly want to
make a turn-around.
Improving
Your Credit Rating
You
Can Improve Your Own Credit Yourself, in most cases: Remember
that, while we generally suggest you use professionals in
the mortgage process, we believe that most credit repair can
be done yourself for a fraction of the cost of a credit
counselor. With a few exceptions (such as paying to
have the "Bureaus" correct reports/reissue scores
extra fast), your biggest expenditures are time, postage and
phone calls. All you need is a plan. What
follows are a brief summary of tips, but you can get a very
good guide and record-keeping system for only $29 from The
Credit Docor. SEE
BELOW
Working with
Credit Bureaus: Remember
to "keep your cool". The bureaus are only keepers
of databases of credit records. They are not the source
of your credit information and have nothing to gain by
showing your credit history as worse than it really
is. As a matter of fact, if they consistently
provided reports based on inaccurate information, that
will hurt their business, not help it. The goal of every bureau is
to have the most accurate records possible. The
bureaus would not be serving any valuable purpose if
that were not the case. Mistakes in their records, most likely, originated
with the actual creditors that feed your credit history
to the bureaus each month. Thus, if you can document a
mistake, each bureau is only too happy to
correct your credit record. Just remember that
there is a limit to the amount of investigation each
bureau will make to correct a mistake. It is your
obligation to document errors or omissions to the each
bureau with proof that comes mostly from your
creditors.
Remember that
each bureau is an independent company.
Successfully working with one company will not
affect the others. Each bureau must alter their own incorrect file based on
proofs and information that you supply to them because the
bureaus do not share information. That is
the reason that credit repair takes such time.
Improving your credit rating involves some or all of
these steps: (1)
obtaining your credit report from the above companies; (2)
identifying and disputing errors, duplications and
omissions (such as payments made but not shown); (3)
paying off small delinquent accounts; (4) getting on a
payment plan for large delinquencies; (5) obtaining
additional credit, if needed (try locally-based stores,
gasoline and secured credit cards); (6) notifying the
credit bureaus of the actions you’re taking; (7) adding
positive information to your file, such as regular credit
payments that are current but not showing on the reports
because the creditor is not a subscriber of the bureaus
(such as employee loans, private mortgages or mail-order
installment payments); (8) adding a brief (100 words or
less) Consumer Statement (a note explain your side of a
credit dispute); and, last, (9) waiting for results to
show on the reports.
Don’t give up! Write the
bureaus (don’t phone them) repeatedly until your records
have been corrected and updated.
Here are some more details:
Judgments will
have to be paid off in full, in most instances, or put on
a payment plan in other cases.
You should pay off all small debts on which you are
delinquent and arrange for payment schedules on larger
delinquent debts—then pay as agreed for at least 6
months. You
can often get a creditor to agree to accept less than the
original debt if you pay in one lump sum.
If your
credit report shows debts that are not yours, incorrect
figures or debts that have been paid, dispute the items.
You must provide proof to the credit bureaus to
support your contentions.
By producing evidence of errors or previous
payments hat you may have in your possession, you may
induce the credit bureau(s) to remove, modify or update
information that is showing on the report. The credit bureaus are also required to remove an item from
your file if a creditor doesn’t respond to the
bureau’s inquiry (prompted by you) within 30 days (even
if the debt is legitimate). The FTC handles
complaints against credit bureaus.
If the credit bureau doesn’t respond to your
request to investigate your claim , you can contact the
Federal Trade Commission at: Call Toll-Free: (877)
FTC-HELP or
Write: Consumer Response Center, Federal Trade Commission,
600 Pennsylvania Ave, NW, Washington, DC 20580.
On-Line:
http://www.ftc.gov
or try http://www.ftc.gov/ftc/complaint.html
to make a complaint.
Remember,
you are protected by the
Fair
Credit Reporting Act
which gives you specific protection under
the law!
Identity
Theft:
It is important that you take all reasonable
steps to keep your confidential information private.
There are numerous internet, phone and mail scams that are
designed to obtain this information. If one of these
scams succeeds, the results will range from annoying to disastrous
for you and your credit record. Click here
and here
to read about what you can do to protect yourself online
and offline.
Credit Counseling:
Be cautious if you choose to have a credit
counselor or credit correction company to assist you in
improving your credit rating.
There are good and bad counselors out there.
You should be particularly suspicious of anyone who says
they can completely clear your bad credit by offering you
the opportunity to obtain a new federal ID number.
You could end up being charged with fraud!. We suggest that you investigate the free or
low-cost Consumer Credit Counseling Services that exists
in most areas. To
locate a local office, call The
National Foundation for Consumer Credit, at
1-800-388-2227,
or try
contacting the NFCC online: :
https://www.nfcc.org/help/locator.html
on-line. If you do
choose to use a private firm, be careful of contracts you
sign and remember that they are allowed by law to charge
only a minimal up-front fee. More credit information is available from the US Consumer
Information Center. Go to
http://www.pueblo.gsa.gov/money.htm
on-line.
How
We Can Help You:
As
was mentioned above, we are not credit counselors.
On the other hand, our experience can help you get your
credit on track by providing, at no cost or minimal cost,
the following information or services:
-
We
can tell you, from our point of view as a lender, what
items of your credit either caused us to reject you for
a loan or prevented you from getting the most favorable
loan type or rate;
-
We
can give you suggestions for getting more credit if you
do not have enough credit "depth" to satisfy a mortgage lender;
-
We
can expand on the advice that is listed on this page;
-
We
can provide you with blank letters of various types that
you can
use as a starting point when composing letters to your creditors or the major credit
bureaus;
-
We
can connect you with our credit advisor that can make
quick corrections to your reports & scores, if you
have the documentation, for reasonable fees that
are
usually much less than the cost of private credit
counseling.
-
We
can run a credit analysis that will make suggestions for
improving your credit scores and advise you as to the
amount of cash it will take for you to obtain the most
improvement to your credit.
-
We
can advise you about mortgage programs that
may overlook old credit records; allow "bad
credit" to remain in place; allow the use of
"alternative credit" (such as utility bill
payment records) or allow lower credit or a more limited
credit history than is usually required.
-
We
may be able to obtain a mortgage for you, with somewhat
less than the most favorable terms, and then refinance
the loan when you have improved your credit records.
CONTACT
US!
Free
Booklet: Boost Your Credit Score in 7 Easy Steps
|
