Ways To Improve Your Credit Score

1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else's poor financial management. 

2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

3. Don't charge your credit cards to the maximum limit. Try not to use more than 30% of the total card limit.

4. Wait 12 months after credit difficulties to apply for a mortgage. You're penalized less for problems after a year.

5. Don't order items for your new home on credit — such as appliances and furniture — until after closing. The amounts will add to your debt and effect your debt to income ratios.

6. Don't open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.

7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.


Shared from:http://featherstoneco.realtytimes.com/advicefromagents1/item/38325-improving-your-credit-score

Is a Short Sale Right for you?

If you've been unable to keep up with your mortgage payments, it might seem like your only option is foreclosure.  There is, however, another option.

You may be able to do a short sale on your home before foreclosure.  Here are the advantages & disadvantages to consider before doing a short sale.

What is a short sale?

A short sale is when a property is sold at a lower price than the amount the homeowner owes on the mortgage, & the mortgage lender agrees to the "short" payoff.  Banks & lenders have specific rules on which properties qualify fort a short sale.  If you decide on attempting a short sale in lieu of a foreclosure, call your lender.  You will need official approval, as the lender is agreeing to a discounted payoff.

Pros & Cons

The advantages of a short sale:

• Your loan will be considered paid in full.
• You'll avoid foreclosure.
• A short sale has a smaller impact on your credit.
• After a short sale, you may be able to buy another home sooner than you would with a foreclosure.

The disadvantages of a short sale:

• You take full responsibility for the sale of your home, which can be time-consuming.
• If you find a buyer quickly, you have have to move sooner than expected.
• All proceeds from the short sale go to the lender.

Impact on your credit

A foreclosure puts a serious black mark on your credit history that will last for seven years & hamper your ability to get loans & credit in the future.  There is also a time limit after a foreclosure in which you will not be allowed to buy another home.

A short sale doesn't have the same impact as a foreclosure, but your credit will still be damaged & you may struggle to find a lender that is willing to give you another mortgage soon after a short sale.

Getting help

If you're unsure whether a short sale is right for you, speak to a real estate attorney.  A real estate attorney can review your situation & help guide you to the best solution.  You can also peak to your lender.  Your lender has specialized loan officers who are able to review & guide consumers at risk of foreclosure.

Shared from:  Susan Wellish www.realtor.com

Is Your Payment History Hurting Your Credit Score?

Missing one bill payment might not seem like a big deal.  That is until that payment blemish causes a lender to rethink your loan's terms - or even your overall eligibility.

Being a forgetful bill payer is a big deal to lenders & credit bureaus.  And if you continually skip payments, you can seriously bruise your financial future.

Your Credit Score

How you've paid your bills in past accounts for 35% of your FICO credit score.  Typically, creditors don't report a payment as late until you're 30 or more days past due.  However, some lenders report earlier - as soon as one day past the deadline.  Even one missed payment can have a negative effect on your credit score.

If you're late with more than one creditor or your bills are not paid for more than a month, your credit will take a serious hit.  Multiple late payments will be reported multiple times, while severely late payments - 60 days or more - count more heavily than payments made within 30 days of due date.

Late payments will remain on your credit history for seven years.

Collection Amounts

If your accounts go unpaid, they may be sent to a collections department, causing serious damage to your credit score.

Typically, accounts are sent to collections if they're unpaid for 90 days or longer - though some creditors may turn accounts over sooner or later.  When this happens, the original creditor actually sells the debt over to a collection agency, which in turn tries to collect from you.  When your account is turned over, the original account will be reported as "charged off/unpaid."  You'll also get a second serious black mark on your credit history when the collection agency files a report about the debt.  These reports will stay on your credit history for seven years.

Apply for a Mortgage

If you're applying for a mortgage, having late payments & collection accounts could be harmful.  Mortgage lenders look more closely at your credit history than other lenders (a process known as underwriting).  With a history of late payments, you likely won't qualify for a lender's best rates or terms.  Unpaid collection accounts may cause your application to be denied alltogether.

Improving your Score

If you only have one late payment, talk to your creditor.  Many creditors are willing to forgo reporting a single late payment, or remove the report, if you have a history of paying on time.

If you've missed more than one payment, time & determination are your best tools for improving your credit score.  Making a late payment or having an account sent to collections will have the greatest impact on your credit score as soon as it is reported.  As time passes, the impact on your credit score will lessen.

Meanwhile, keep building up positive history by paying every bill on time, which will help counteract past problems & improve your credit score.



Shared from:  www.realtor.com

Not Only Did You Lose Your House—Your Credit Score Is a Mess After a Foreclosure

“Foreclosure” is a frightening word for a number of reasons. Topping the list? If you’re unable to make your mortgage payments, you’ll lose your home.

However, the misery doesn’t end there. Foreclosure ripples out and affects your credit score, which can hurt your chances of qualifying for a new loan—or another home—in the future.

Foreclosure and your credit score

A foreclosure appears on your credit report and leaves a dingy residue that can seriously damage your credit score.

“A mortgage is considered one of the safest forms of credit but is also typically one of the largest debts a person ever has, so when you stop making payments, or are late on a payment, you will see a large drop in your scores,” said Rod Griffin, director of public education for Experian.

While it’s impossible to pinpoint exactly how many points your credit score will plummet after a foreclosure, it might be enough to drop your score from the prime to subprime range. “A consumer could drop credit tiers following a foreclosure. [It depends] on the consumer’s credit history prior to the foreclosure and if there are other negative factors contributing to a drop at the time of foreclosure,” Griffin said.

And while some of the negatives will diminish over time, a foreclosure will linger on your credit report for seven years from the filing date.

Rebuilding

Getting your credit score back on track after a foreclosure boils down to following a simple philosophy: Keep it positive.

“Because negative information is deleted eventually, you can rebuild your creditworthiness if you take control of your debts and build a history of positive payments that will continue to appear after the foreclosure disappears,” said Griffin.

Applying for credit

Applying for credit after a foreclosure is tricky.

“A foreclosure in your credit report is typically looked at by lenders as very negative. It may not be as bad as bankruptcy, but not paying your mortgage and losing your house is very close,” Griffin said.

If you apply for credit cards, department store cards, or other loans, you may find lenders aren’t as willing to extend credit as they once were. And when you do get approved, you’ll likely face higher interest rates, higher annual fees, or more onerous terms than you would have before your foreclosure.

Buying a home

If you think you’re back on solid financial footing and want to buy again, jumping back into the home ownership saddle is near impossible shortly after a foreclosure. All mortgage loans have a waiting period after a foreclosure before you’re able to apply for another loan:

• Conventional loans require a seven-year waiting period.
• Loans backed by the Department of Veterans Affairs require a two-year waiting period.
• Loans backed by the Federal Housing Administration require a minimum of one year.

It’s tough to rebound from a foreclosure and become a home buyer again, but the devastating effect of defaulting on a loan has a more immediate (and negative) impact on your credit score.

Reposted from:  http://www.realtor.com/advice/foreclosure-makes-a-mess-of-your-credit-score/

How To Decode Your Credit Score

 

A common complaint about credit scores is that they are a “black box” containing a set of mysterious secret formulas that can confuse even the most savvy of consumers.
While there are many ways in which trying to understand credit scores can be frustrating to consumers, for high scorers eyeing that elusive perfect score, part of the confusion often comes in the form of those seemingly “meaningless” reason codes that accompany almost all credit scores, good or bad.

By meaningless reason codes, I’m talking about the comments that accompany high (over 760 FICO)
credit scores, with such descriptions as “no recent bankcard balance information,” “too many bankcard charge accounts,” “lack of recent installment loan information,” and other messages that tend to make someone who is effectively managing their credit feel like they should be doing more.

Understanding Reason Codes

As a high-scoring Credit.com reader recently asked,  “I feel like I am penalized for owning my home and not being in debt. Where’s the logic in that?”
This is a good question, to which a logical response would be that these reason codes represent the scoring factors with the greatest difference between the number of points possible and the number of points achieved. In other words, these are the areas of the score where you “lost” the most points.
Reason codes can be valuable to consumers with scores in the lower-to-middle scoring ranges, as they point out the areas needing the most improvement, mostly within the payment history and amounts owed categories that together make up almost two-thirds of a FICO score.
For high-scoring consumers, who by definition have already been paying on time and keeping balances low — practices everyone should follow — reason codes tend to focus on the less important scoring factors that can help distinguish one high-scoring consumer from another to a lender, but that doesn’t make much sense to someone simply trying to do what it takes to raise an already good score.

Some Common Reason Codes

To illustrate, let’s take a look at some of these low-impact reason codes that tend to appear with high scores, and what might happen if you attempt to act on them:

• No recent bankcard balance information. This usually means there are no credit card accounts with balances on the credit report. To remedy this situation, you may be tempted to stop paying your balances in full each month, and instead make only minimum payments.  However, doing so is more likely to have the opposite effect of dropping your score and replacing that reason code with one such as “amount owed on revolving balances is too high.”

• Too many bankcard charge accounts. This one sounds pretty straightforward, but there’s a catch. Notice how this reason code doesn’t say there are too many “open” cards — just that there are too many cards on the report? People often interpret this reason code as “too many open bankcard charge accounts” and close one or more cards, not realizing that by doing so they raise the risk of higher credit utilization (balance/limit ratio) and a lower score, accompanied by the reason code, “proportion of balances to credit limits on revolving/charge accounts is too high.”

• Lack of recent installment loan information. This code is similar to the first one above, with loans replacing credit cards.  Taking out a new loan to satisfy this reason code is more likely to be counterproductive by lowering your score and telling you via the reason codes that your “ratio of loan balances to loan amounts is too high” and you have “too many accounts recently opened.”

So if these meaningless reason codes are starting to make some of you high scorers feel like you can’t win for losing, remind yourself that a 760 FICO score is likely to qualify you for the same credit terms that a perfect score will, and go back to managing your credit as you’ve been doing all along.  And if you’d like to get a better understanding of which credit score components you should be working on, get your free Credit Report Card from Credit.com or pull a free credit report once a year from each of the credit bureaus at AnnualCreditReport.com.


Reposted from:  http://blog.credit.com/2013/02/how-to-decode-your-credit-score/

Preparing Your Credit to Buy a Home

As the housing market heats up in 2013 and more consumers consider buying a home, it’s important to consider the role that your credit score plays in your ability to secure a mortgage. Conventional mortgage lenders will typically want a FICO score of at least 720, or in some cases 740, but those with a score below 700 may still qualify for an FHA loan.

With that in mind, here’s a look at the steps you should take to prepare your credit before applying for a mortgage.

1. Review your credit report.

Several months before you plan to get a mortgage, check your credit report for any issues. If you generally pay your bills on time, then check your credit two to three months in advance just in case you need to correct any mistakes, says Carolyn Warren, author ofMortgage Rip-Offs and Money Savers and Homebuyers Beware. For those who know they have late payments or other derogatory items on their account, Warren suggests starting six to nine months in advance to clear up those issues.

2. Dispute any inaccuracies.

If your credit report contains errors—for instance, there’s an unpaid item that you’ve actually paid or an account showing up that isn’t yours—you’ll want to file a dispute with the credit reporting agency. A report from the FTC earlier this year shows that roughly a quarter of the reports examined by the commission contained at least one “potentially material” error.

3. Make sure you have several tradelines.

Conventional loans require at least three tradelines (any combination of credit cards, student loans, car loans, and so on) that have been active within the past 12-24 months. FHA loans require two tradelines. It’s fine to have more, but if you have fewer, you won’t qualify for a mortgage. If you need to open additional tradelines, Warren suggests getting a major credit card like a Visa or a Mastercard (not a store credit card) at least six months before you apply for a mortgage and using it for items you would buy anyway. “Never charge more than 30 percent of your allowed limit, and pay it off in full every time you get your bill,” she adds.

4. Leave older credit lines open.

Older, more “seasoned” tradelines help boost your credit score, so leave those credit cards open even if you don’t use them all the time. “A lot of people think, ‘I’ve got six credit cards, I’m going to close the four that I don’t use,’” says Warren. “But that’s a big mistake because your good accounts are adding positive points to your score.” Try to use those credit cards every few months and pay the balance in full so those tradelines remain active.

5. Avoid opening new credit lines.

Once you’re six months away from applying for a mortgage, stop opening new credit lines, as this can temporarily lower your score. “The credit bureau doesn’t know how you’re going to handle that new credit, so because there’s that uncertainty, it’s a risk factor,” says Warren. “Lowering your credit score is not worth that 10 percent discount you’d get from a department store for opening a new credit card.”

6. Stop buying on credit.

In the excitement of buying a house, some people rush out to charge new appliances or furniture before closing. But even if you’re in escrow, having a debt utilization ratio above 30 percent right before closing could disqualify your loan. “Unless you’re gonna pay cash, have patience for your new furniture until after your loan is closed,” says Warren. Also hold off on getting a car loan, as car financing tends to be more lenient than mortgage criteria.

7. Don’t shuffle money around.

When you apply for a mortgage, you’ll need to provide several months of bank statements for your checking and savings accounts. “If you suddenly shut an account or have a large transfer from one account to another, then you’re going to have to paper-trail that whole account too,” says Warren. “Leave your money and your accounts the same for at least three months. It won’t disqualify you but will make a paperwork hassle.”

Reposted from:  http://www.creditsesame.com/blog/how-to-prepare-credit-buy-a-home/