Credit and Credit Scores
The following are Credit tips that I share with clients to help improve their personal credit scores. Knowing where you stand with your credit months to years before your home search will save you weeks to months during your home search. Raising your credit score will help you get approved for a mortgage loan and could save you thousands of dollars with a lower interest rate. Some of the credit tips I suggest are:
1. Check your credit report- Credit Karma is free and the worst thing is not knowing what your credit score is and what outstanding items appear on your credit report. But keep the credit inquiries to a minimum. Each pull by you or a Creditor does impact the score.
2. Setup payment reminders- Every account has “account alerts” so you will never forget that odd payment due date in the middle of the month.
3. Reduce the amount of debt you owe- One of the key elements that credit scoring models use is usage percentage. You should never owe more than 30% of your credit limit at any time. If you owe $8000 on a $10000 debt limit you have reached an 80% usage percentage and your score will suffer even if you pay on time.
4. Pay your bills on time- delinquent payments if only a few days late and collections can have a major impact.
5. If you have missed payments- get current and stay current- If you miss a January payment and make it in February than that payment was for January. Then the next payment in March was really for February. They will report you 30 days late every month. I have seen reports that show 10 months of 30 day lates. If you look at the report it was late once, and the borrower made payments but never caught up. This is called a rolling 30 day late. Call the creditor and get caught up.
6. Call the creditor- If you are having trouble making timely payments CALL the creditor and let them know the situation. Many times the creditor will work with you regarding the scenario and may never report you late or perhaps take a lesser payment.
7. Pay off Rather than moving it around- The most effective way to improve your credit score
When a Client needed to pre-qualify for their loan they completed the online application at www.robsuling.com and Rob pulled credit and there was a block on their Transunion report and he was only able to access Equifax and Experian. This is not uncommon…so he called to say, I only got two scores….right now I have to use the lower of the two I pulled which is a 702. If I can pull the third score and it is higher, it might save you some money. So the Client decided to have the block removed and try for the higher score.
Credit score of 780 on a $300k loan with 20% down is 4.125% with no points
Credit score of 700 on a $300k loan with 20% down is 4.375% with no points
So…a $44/mo difference or $16,148 over the course of 30 yrs.
The borrower said, “that’s good…because I pulled 775 on Transunion from Credit Karma, I removed the block…go ahead.”
So Rob re-pulled credit…… and pulled a 707 with Transunion
So Rob called the borrower back and said, I just re-pulled credit and got a 707…
So the borrower went back and after spending hours on the phone with Transunion, discovered that an old creditor had miss-reported a transaction and showed it as delinquent. So he said he would dispute the issue….
Now that causes a problem for the mortgage. Mortgage companies use the application they take plus the credit report pulled and we input that into either Freddie Mac or Fannie Mae’s Automated underwriting engine. If the system reads the “dispute” language from the credit report, it thinks the info is inaccurate and shoots out an “error msg”. Most banks need an approval from the credit engine to approve the loan.
The bottom line was that he was being quoted a score from Credit Karma that was inaccurate. So the moral of the story is if you have a client that wants to get pre-qualified, starting things early is always the best idea. In this case, the borrower was able to go back and remedy the credit error, get documentation, and TWO of the three scores that were reflecting the error shot up 80 points. $16k back in his pocket with a little up front homework!
Questions about your situation? Feel free to contact Dennis Bell, Realtor – Relocation Consultant, Samson Properties, 14526 Lee Road, Suite 100, Chantilly, VA 20151, 703.928.4428, firstname.lastname@example.org and Rob Suling, VP Presidential Bank Mortgage, a Division of Presidential Bank, FSB, Cell: 703.966.9960.
Lately, I have seen a lot of Realtors fishing for home sellers’ through Ads like: I have buyers who want to buy a home in your neighborhood this month….if you’re thinking of selling, please contact me 555-FISH. Hmmm, this guy already has a buyer and I was thinking of selling. I wondered how successful could this be? Turns out in my neighborhood, our top agents represent both parties 10% and 17% of the time over a 2 year period. I guess if you build enough trust people can forget about real protection. The AD could read I am looking for someone ready to sell but I can only provide one buyer, competition is over-rated, but I don’t think as many would call.
In Real Estate the most common legal arrangement is for a listing agent from one company to represent the seller and a buyer’s agent from another company to represent the buyer in a transaction. A separate agent is looking out for each best interest. Some times the price is accepted, separately, by Buyer and Seller in the presence of the same agent. In situations where the price is agreed upon, separately to the same agent, and both parties agree to engage the same Realtor a Dual agency exists. In a Dual agency relationship, the Dual agents’ fiduciary duties to her clients are much more limited. They can no longer be an advocate for either party because each client has opposite goals. The agents’ job is now to shepherd the Transaction through to Closing. Yet many overlook this loss of safe representation because:
Buyer: They want to be in a specific neighborhood and are afraid of the price escalation that comes with competition. They show up first and without a Realtor. They may even solicit home-owners before the sale and end up with the seller agent.
Seller: The home is very difficult to show and they have buyer interest expressed before the sale, a quick sale is needed or wanted.
Agent: With price and condition agreed upon by buyer and seller it is just paperwork to take care of till Closing and more income from one property.
BUT, most problems are not uncovered until financing review for buyers and home inspection of sellers home. When your seller or buyer ask “what’s going on” the Realtor is limited in what they can tell you. This relationship may not help you make the best decision moving forward. When there is a problem who represents you?
Realtor Magazine (NAR) recommends that both parties retain attorneys to advise them regarding the purchase agreement, contingencies, price, earnest money, or other negotiated issues. This can be a win-win for all parties involved since the client will be adequately represented and the attorneys’ participation will take pressure and liability off of the Realtor.
Be smart. Be represented. Reach out to a relocation expert who seeks to represent only you.
Dennis Bell 703-928-4428 email@example.com
Moving to Northern Virginia
Dennis Bell and a lot of folks who have helped thousands to relocate.