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bad credit

Better credit score tips

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CREDIT SCORE TIPS

Are you making this credit score mistake?

Many people believe that running up credit card balances, then making on time payments or paying it in full each month will build higher credit scores.  This is a MYTH!

You don’t need to carry a balance or use your card in order to build credit.

This pervasive myth usually gets said around a dinner table or past among friends, and of course is all over the internet – but is a terrible piece of advice — especially if you have bad credit to begin with.

Credit score factors

Carrying a balance says you have credit, need the credit, and are unable to pay off the balance. This is considered poor utilization of credit, and results in bad credit and lower credit scores.

Carrying very little balance, or better yet, no balance, says you have credit available, hardly ever use it, and can pay if off quickly – Which are all GOOD traits and result in good credit and better scores.

You should never carry a balance if at all possible, pay down as much as possible each month if you must carry a balance – and never ever have a late payment under any circumstances to have rock’in credit scores.

When the time comes to buy a home, you want the highest credit scores possible to get access to the most programs and the best interest rates.

Contact our Mortgage Experts at (651) 552-3681 of apply online at www.MortgagesUnlimited.biz

Minneapolis Weak and bad credit loans down since 2007

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Minneapolis, MN:  Not much of a shocker here, but weak, and bad credit loans are down dramatically since the lending correction of 2007.   Part of the reason for the housing collapse was an immense community desire to allow everyone to have a home. Clearly, that experiment failed miserably. Simply put,  not everyone who wants a home loan deserves a loan, regardless of what liberal community activists say.

Mortgage loans written today, have some of the highest “quality” seen in underwriting history. New mortgage regulations pretend to provide important protections to borrowers, but have also lead to a permanent increase in the cost of originating loans to all borrowers, and a dramatic decrease in loans to those with poor credit.

deniedBetween 2007 and 2012

  • Home buyers with credit scores higher than 780 declined by 30 percent
  • Home buyers with credit scores between 620 and 680 declined by 90 percent
  • Home buyer with credit scores below 620 were virtually non-existent

Loans harder to get with no incentive

 

All loans are much more difficult to originate, process, and underwrite.  But small loan amounts, and especially small loan amounts combined with credit challenges require a huge amount of time and effort that loan officers can no longer be compensated correctly to work on.

In the past the loan officer and their company were rewarded and compensated for their extra efforts with problem clients. Today, loan officer walk away from them because there simply is no reward or incentive to help challenging clients.

Simply put, if you worked on a project for 10-hours, and got paid the exact same amount as you do on a 1-hour project, would anyone ever work on the 10-hour projects anymore?  Of course not… The government and community activists may disagree, but Loan Officers and lenders are in this business to make a living, not work for free.

Does paying old collections fix my credit?

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Minneapolis, MN:  Sometimes life happens.  Good people end up with bad credit. But for most, bad credit is fixable with a little time, effort, and knowledge.  Credit decisions for just about anything, car loans, credit cards, home mortgage loans all depend on your credit score. We all know having a higher score means not only getting the credit, but at lower interest rates.

deniedThe biggest item people need to understand is that a huge portion of their credit score is based recent information versus old information.  A 30-day late payment on a car loan from 5-years ago DOES show up on your credit report, but it has little impact compared to a 30-day late payment from last month.

Paying off old collections:

There really isn’t much you can do about late payments on your credit report, so an area that many people attempt to correct is any old unpaid collection accounts.  In theory, paying off old collection accounts seems like a good way to improve your credit score. but mistakes that lower your score, especially  temporarily are most often made here when attempting to improve your credit score.

Date of Last Activity:

Assume you have a 5-year old collection account. It is just two-years from falling off your credit report, and while collections are bad, because of its age, it is only having a small impact on your overall score.  By paying it today, you move the date of last activity to a current date.  Your credit report now “sees” this payment activity as current.  You now have a “current” paid collection, versus an old unpaid collection. While moving a collection from unpaid to paid will help in the long run, it may hurt your score today.

Assume one the other hand you have a one-year old collection account. This is having a major effect on your credit score, and should be taken care of immediately.

Because of how the date of last activity algorithm works, when attempting to improve your credit score, always deal with the most recent negative accounts first.

In the long run, paying off old collection accounts is ALWAYS the best thing to do – but be aware that  if you are looking to improve score for a purchase in the short-term, paying off old collection just might end up lowering your score before you see the long-term improvements you desire.

 

Can you qualify for a mortgage with bad credit?

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Can you qualify for a home mortgage loan with bad credit?

FACT: The mortgage and credit crisis which exploded onto the scene in 2007 has eliminated bad credit and bruised credit mortgage loans. Lenders simply don’t offer bad credit sub-prime home loans anymore.

What’s Your Credit Score?
Every lending facility uses guidelines to determine your credit worthiness. Upon reviewing your application, you’re given a credit grade and a determination regarding your loan’s approval or denial. Lenders DO NOT give loans to those with bruised credit anymore. If you are denied by a one lender, contacting 10 more probably won’t help. Click here for some general criteria used within the lending industry to determine credit.

What credit score do I need for a home loan?
Generally speaking, in today’s mortgage world, if your middle credit score is below 640, it is very unlikely that you will qualify for home loan financing no matter what anyone tells you or you see elsewhere on the internet. With a score below this level, you really should save yourself the hassle. Stop attempting to find mortgage loans, and work on improving your scores instead.

Review your credit score?
If you are not sure what your credit score is, you should officially find out. Apply for the mortgage loan, and let the mortgage lender review your exact situation. DON’T ASSUME YOU CAN’T QUALIFY!

CREDIT PROBLEMS & ANSWERS

Late Payments
If your credit has multiple RECENT 30, 60, or 90 plus day late payments, you probably won’t qualify. Especially if those late payments occurred LESS THAN than two years ago. Lenders want a clean recent payment history. Check HERE for some general criteria used within the lending industry when you have late payments.

Credit score graphCollections, Judgements, Tax Liens
If your credit history indicates unpaid collection accounts, most “A” grade loan lenders will require these amounts to be paid off before the loan is funded. FHA typically will ignore them if they are under $500, and more than 2 years old. Medical collection “usually” are ignored. Judgments’ (you got taken to court & lost), are almost always REQUIRED to be paid off before approval.

Bankruptcy & Foreclosures

  • If your bankruptcy is more than two year old, you can usually be approved for an FHA loan with as little as 3.5% down.
  • If your foreclosure was recorded is OVER least three old, you may qualify for an FHA loan with as little as 3.5% down payment.
  • If your bankruptcy is older that 4 years, and you have good re-established credit, you may now qualify for an standard conforming loan.

    • High Debt Ratios
    If your income-to-debt ratios are too high, you can either reduce your personal debt (i.e., pay down your debt), obtain a debt consolidation loan, pay down your debt with funds from the sale of personal assets (boat, camper, etc.), select a lower interest rate ARM loan, or add a co-mortgagor. 

    Is a debt consolidation loan for you?
    If you have any late payments on your record, part of the reason may be because of high credit card debt. If you qualify, you can pay off all of your high-interest credit cards into a low debt reduction refinance loan which may be tax deductible (unlike credit cards, which are NOT tax deductible).