Continuing on the credit report scores thing, someone recently told me about a situation they had encountered with their credit scores. They follow their credit on one of the Online Credit report dot com company's and they thought their scores were rebounding rather well after a rough financial time. When they thought the scores were high enough to apply for a line of credit, they did so and were denied. The reason was that their scores were too low!
Investigation of this matter indicated that there are really two sets of scores! One score that you and much of the retail credit market sees and another set of scores that mortgage companies and banks see! Yes, as crazy as that seems, I ran that person's credit only to see that the scores on my company's report were in fact agood 30 points lower than the scores he had on his credit report, received from a paid subscription to one of those credit report dot com companies!
The moral to the story, be careful and if you subscribe to one of these reporting company's, ask for the scores that the banks and mortgage compnaies see, otherwise you run the risk of being embarrassed when your loan is turned down for low credit scores!
The next post will direct you to an article that shows how people with bad credit get it fixed quick in order to purchase a home! Stay tuned!
Friday, June 08, 2007
Wednesday, June 06, 2007
What Affects Your Credit Scores?
One of the best kept secrets of the three major credit bureaus is how they arrive at the credit scores. There are many theories and I would suggest that some information you receive may be fact or fiction! Having spent as many years as i have involved in mortgage lending, I can tell you that I have seen a lot of credit reports, some outstanding, others less than stella! I have also seen people's credit that is basically good, but the scores do not reflect it.
What i see is all payments being made as agreed and yet the credit scores are rather low. What I have deduced is that often times, there are too many open lines of credit with balances. But more than the fact that there are balances is the fact that the balances on the trade lines is greater that 50% of the high credit limit. That, I have learned is a detriment to the individual's scores. The fact that you have several trade lines that are open with "0" balances is less likely to cause you a problem, so don't go crazy closing accounts! As a matter of fact, I always recommend three or four active trade lines in addition to your mortgage payment. That will more than meet the criteria set by most creditors. But, if you have another two or three accounts that show a "0" balance and were always in good standing, there is no need to close them. They will not hurt your scores!
Now, keeping too many lines of credit open might be of concern for an entirely different reason, credit fraud! So, for this reason, limit the number of accounts that you have open to the rule of thumb mentioned previously if you are trying to move your scores higher.
I could go on indefinitly about this topic, but in order to keep it readable, I will leave you with these thoughts. First, if you own a home and have a mortgage, always, always, always, make your payments on time. Never let them go past thirty days due; credit bureaus will get the reported late payment and your scores could be hit as much as 50 to 70 points. And, it takes a long time to make those points up again! Being late on your payment beyond the 10 or 15 day grace period is not late in the eyes of the credit bureaus. It has to be more than 30 days late. Keep that in mind.
Next, never voluntarily turn in an automobile with a lien against it. The creditors will auction it and will charge off the difference between what you owed and what they collected. Although I do not know if it always happens this way, it seems that there is always al balance due because they sold the car for less than you owed. And, that amount will go on your credit as a voluntary repossession with a charge off for the difference. If you cannot afford to keep your car, sell it for as much as you need to cover the balance of the loan if at all possible and then pay off the loan!
Credit cards are the reason that most people get into trouble. If you don't absolutely need it and you do not have the money to buy it, don't! If you have balances on your credit cards and you carry those balances from month to month, you had better start making more than the minimum payments or you will still be paying for those cards ten to fifteen years from now. If you have more money due out in bills than you have to pay, my recommendation is that you contact the credit card company and see if they will take a partial payment and allow you to catch up the following month. Do not just not pay the bill, but if you need to skip a payment, make absolutely sure it is not a mortgage or a car payment. Those are the things that will hurt your scores the most.
If you can pay your balances down to less than half the high credit limit on those credit cards, that too, will begin to raise your scores.
If you have questions about credit or mortgage lending, feel free to contact me. I will try to answer those questions or steer you in the right direction!
What i see is all payments being made as agreed and yet the credit scores are rather low. What I have deduced is that often times, there are too many open lines of credit with balances. But more than the fact that there are balances is the fact that the balances on the trade lines is greater that 50% of the high credit limit. That, I have learned is a detriment to the individual's scores. The fact that you have several trade lines that are open with "0" balances is less likely to cause you a problem, so don't go crazy closing accounts! As a matter of fact, I always recommend three or four active trade lines in addition to your mortgage payment. That will more than meet the criteria set by most creditors. But, if you have another two or three accounts that show a "0" balance and were always in good standing, there is no need to close them. They will not hurt your scores!
Now, keeping too many lines of credit open might be of concern for an entirely different reason, credit fraud! So, for this reason, limit the number of accounts that you have open to the rule of thumb mentioned previously if you are trying to move your scores higher.
I could go on indefinitly about this topic, but in order to keep it readable, I will leave you with these thoughts. First, if you own a home and have a mortgage, always, always, always, make your payments on time. Never let them go past thirty days due; credit bureaus will get the reported late payment and your scores could be hit as much as 50 to 70 points. And, it takes a long time to make those points up again! Being late on your payment beyond the 10 or 15 day grace period is not late in the eyes of the credit bureaus. It has to be more than 30 days late. Keep that in mind.
Next, never voluntarily turn in an automobile with a lien against it. The creditors will auction it and will charge off the difference between what you owed and what they collected. Although I do not know if it always happens this way, it seems that there is always al balance due because they sold the car for less than you owed. And, that amount will go on your credit as a voluntary repossession with a charge off for the difference. If you cannot afford to keep your car, sell it for as much as you need to cover the balance of the loan if at all possible and then pay off the loan!
Credit cards are the reason that most people get into trouble. If you don't absolutely need it and you do not have the money to buy it, don't! If you have balances on your credit cards and you carry those balances from month to month, you had better start making more than the minimum payments or you will still be paying for those cards ten to fifteen years from now. If you have more money due out in bills than you have to pay, my recommendation is that you contact the credit card company and see if they will take a partial payment and allow you to catch up the following month. Do not just not pay the bill, but if you need to skip a payment, make absolutely sure it is not a mortgage or a car payment. Those are the things that will hurt your scores the most.
If you can pay your balances down to less than half the high credit limit on those credit cards, that too, will begin to raise your scores.
If you have questions about credit or mortgage lending, feel free to contact me. I will try to answer those questions or steer you in the right direction!
Subscribe to:
Comments (Atom)