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Posts Tagged ‘credit scores’

There are many reasons to improve your credit score as well as ways to do just that. To improve your personal financial stability and get lower credit rates on mortgages and auto loans you need to improve your credit score. Be sure to pay your bills on time; as this will improve your credit report and score. To properly restore your credit history you must be willing to take the steps necessary to improve the credit reports and raise your credit score.

Credit score can be adversely affected by poor performance on your credit obligations, high debt, incorrect information, fraud or identity theft. Seven years from the date of the last payment, credit listings will disappear from your credit report completely. Everything from the interest rates you will pay to background checks are impacted by your credit score.

Credit reports often have incorrect information. Credit reports are important and it is necessary to check them 3 times a year if possible. The three main credit bureaus are Experian, Equifax and Transunion. Different financial institutions will report to different agencies. Therefore it is important to check all three at least once a year. You can obtain a free credit report if you are ever turned down for credit or have an adverse decision effecting your credit. Most states allow you to receive one free report each year from each of the three main credit reporting agencies.

Having a low credit score may also be referred to as bad credit. Bad credit is caused by such factors as negative listings or insufficient credit history on your credit profile. Low credit scores can result in you paying higher interest rates for mortgage loans, car loans or credit cards if you quality at all. Bad credit can even cause you to be denied the ability to open a checking account. It is best to understand your credit report, reduce your debt whenever possible and pay your bills on time.

You can repair your credit yourself rather than paying someone to do it for you. All aspects of your financial life can be improved once you repair your credit report. You’re probably asking “how do I fix my credit”. Get your credit report from each of the three credit bureaus; Equifax, Transunion, and Experian. If you find an error; write the credit agency and ask them to correct it. Credit bureaus have 45 days after they receive your written letter disputing an item on your credit report to verify the item and make corrections.

Ideally, keep your balance below 30% of the amount you are approved for in order to improve your credit scores. People with an access to lots of credit but who don’t use it very often are the people who will have the highest credit scores. Keep your credit card balances, below 79% of your total available credit limit. Over 80% on balances will kill a solid credit score. Closing credit card accounts does not usually raise your credit rating. In this day and age; most credit advisors are recommending that you not close these accounts. Just pay them off as soon as possible; keep the account open and charge small amounts twice a year; paying in full when due.

If your credit score is 700; it is pretty good. A credit score of 800 is considered excellent and will allow you to get that loan or credit card. You need some credit repair whenever your credit score is below 700. As soon as possible; use any extra money to pay down the credit card with the highest interest rates first. This will cut costs and reduce interest expense. So if you want to improve your credit score; it may be best to first pay down those debts where the balance is over 50% of the total limit.

It is important to understand that a FICO score of 350 – 619 is bad and needs improvement; 620-659 is so – so; 660-749 is good; and 750 – 850 is excellent. Your FICO score is made up of 5 kinds of credit information. Listed from most important to least important, these are: Payment History, Amount owed, Length of credit history, New credit and Types of credit in use. Your FICO score is a summary of your credit worthiness. You must make your credit score your first priority in order to improve your credit score. A good credit report gives the impression that you are a dependable and responsible person. A bad credit report may tell your potential employer that you are not dependable rather it is true or not. Whenever your credit report shows a low credit score; you are at a disadvantage. You can improve your credit report in no time with just a little effort and management.

Click here for a FREE report which give you 101 things to do to improve your credit score. Feel free to share this report with your family and friends; just be sure it remains in its original form.

Understanding your credit score is confusing but worth the effort

Some numbers matter more than others in life. Your cholesterol count, wedding anniversary date, and credit score: These are numbers that matter. They might not matter in that order, but those are the kind of numbers that can really impact your life, especially if you forget them.

One of the things that makes understanding Confusion is the norm for consumers when it comes to understanding credit scores. Credit scores are difficult because there are multiple scores. Which number do creditors give the most weight when evaluating credit? The truth is that credit bureau scores were never meant for the consumer to have to deal with, but the following is some information that may illuminate the subject at least a little bit.

A brief history of the standardized credit score

Before the creation of standardized credit scores, lenders and banks used their own systems to evaluate lending risks. These systems were based entirely on a credit report and varied drastically from one lender to the next. The big problem with the original system is that it was based on a bank officer’s ability to evaluate risk, but without a clear set of rules with clear calculations.

The Fair Isaacs Company developed the first credit scoring system in the 1970s to help minimize inconsistencies in lenders with their own credit systems. The new system became known as the FICO scoring system. The FICO scoring system is based on an algorithm which has been widely adopted by major credit reporting bureaus. A pervasive question about FICO scores is why each bureau gives a different score. Scores will differ quite often, which only adds to the confusion.

Why are there several scores and why do the differ?

There are three major credit-reporting bureaus: Equifax, Experian, and TransUnion. One reason your scores differ is that, because of costs, not all business report to all three. Scores are different because the methods by which they are derived are different. For example, TransUnion might not have exactly the same information about your credit history as Equifax does, and vice versa. Each bureau may be missing information that either helps or hurts your score and will derive a different credit score based on the information at hand.

What’s in a number?

Each of the bureaus claims that their score is the most reliable, naturally, but in reality, one particular score may be different from the others, but it is not necessarily any better. You can get a lot farther to understanding discrepancies in your credit scores by comparing information in each reprt and make sure it’s accurate. Disputing errors can clear up innaccuracies and maybe even boost your score. You might not be an expert at understanding credit scores, but you’ll understand what’s on them.

In the event you have steered clear from what has been going on in the mortgage industry for the last year or two, I thought I would point out some changes and how they affect you.    These changes have slowed down the amount of refinances being done, but being aware these changes may make the process a little easier.

Here are 7 things you should know…

1)       A good credit score is now 740 and higher.   If you have a middle credit score between 740 and 620, you may still be able to refinance, although you may see a few adjustments to your rate for the lower score.  In general, anything below 620 is considered “higher risk” and will not be available for a refinance.

2)       The value of your house has likely dropped.   Nobody enjoys hearing this news, but it is a reality.The last two years, house values have dropped in most parts of the Country.   This simply comes down to supply and demand.   The number of homes on the market has increased due to foreclosures, short sales, unemployment, loss of value, and many other factors.   With so many houses available on the market in each neighborhood, a buyer now has more choices and leverage when purchasing.   This has a direct effect on the appraised value of your home, because appraisers use recently closed sales to determine the value of your home.    If the house across the street recently sold, and is roughly the same square footage, the same age, and has a lot of the same amenities; it is probably a great comparison for an appraiser to use.   This will give you a good indication of the value of your home.

3)       The refinance process takes much longer than before.Many homeowners became used to refinancing very quickly.   This is not the case any longer.   New legislation has been put in place to protect the homeowner, and these steps have delayed the refinance process.    If you are in the process of refinancing, expect the process to take 30 to 45 days with your lender or mortgage broker.    In addition to the new regulations put into place, many lenders have decreased employees, causing additional delays.   

4)       Taking cash out of your home is not as easy as it has been in the past.You will no longer be able to use your house like an ATM machine.A cash out refinance limits you to 85% of the value of the house.A cash out refinance will cost a little more to the borrower in terms of rate or fees.   Expect to pay about 1/8 of a percent higher for a cash-out refinance if your loan amount is 60% higher than the value of your house.   This is industry wide, not on a case by case basis.  

5)       Stated loans do not exist.Your qualification will be determined based upon your ability to prove your income over the last two years.    You cannot use bank statements, receipts from sold goods on EBay, or any other alternative method you may have used in the past.   Underwriters now verify everything and you must be able to prove it with traditional methods such as tax returns, recent paystubs, and verifying employment over the phone.    Regardless of how good your credit, you still need to prove your income.

6)       A new policy has been established for appraising your home.   The new Home Valuation Code of Conduct (HVCC) was implemented to prevent loan officers from pressuring appraisers for higher values.   Now, loan officers are not permitted to speak with an appraiser or order an appraisal directly.   Instead, the new HVCC requires that appraisals be ordered through an independent third party company, and eliminates any interaction between appraisers and loan officers.   The third party acts as the middle man, receives the order from the loan officer, and places an order with an appraiser.   There are many problems with the process in general, but most notable is that appraisals are being done on homes where the values needed to refinance are not realistic.Prior to the change, a loan officer would call an appraiser, place the order, and give an estimated value.  If that value was unrealistic, the appraiser would notify the loan officer and the appraisal would not be done, saving the borrower $300 to $500.   Now, the appraisal is being done regardless of value, the value is too low to refinance, and borrowers are out the cost of the appraisal.This is just one of the minor issues with HVCC….there are others.   Hopefully, some of the people behind this process try and refinance and see how much it is truly hurting the industry, and make the appropriate changes.  

7)       You can get turned down for a loan.    To some, this sounds crazy.People actually get turned down for loans now.The three C’s determine your eligibility for a loan..Collateral, apacity, and character,.    You need to have the credit score, job history, and mortgage and employment history.   In general, your character has to qualify you for the loan.    You must also have the capacity to afford the loan as well as the equity in the home.    The three C’s were thrown out by many companies in the past, but they are back and my guess is they will be here to stay for quite some time.

To find out about more changes in the mortgage industry and what you can do to qualify, visit http://www.timmarose.com