Credit and Credit Scores

  Credit

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
 

  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. 
 
EXAMPLE
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….
 
-----STOP-----
 
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, [email protected] and Rob Suling, VP Presidential Bank Mortgage, a Division of Presidential Bank, FSB, Cell:  703.966.9960.