Credit Scores

A credit score represents a picture of your credit history. This report is obtained from a credit reporting repository such as Equifax, TRW or Experian.

 

What is the range for credit scores?
Lenders look at the middle of the three reporting scores, or the lower if only two scores report. A recent survey of loan applications by WierdLonas.com showed that the average credit score in Florida was 624. Most lenders now require credit scores of 640 or higher. There are some lenders who will accept lower credit scores, BUT be aware that your rate will be significantly higher.

• Credit Scores can range from a low of 300 to a high of 850 points.
• The lower the score, the higher the risk of default, and therefore a credit decline.
• The higher the score, the lower the risk of default, and therefore an approval!
• The “benchmark” for a “conforming” loan is a 620 credit score.

How does this impact you as a home buyer?
Most people can be qualified for a home loan. Consider:

• Can you afford the payment?
• Can you afford the closing costs?
• Do you have any money for the down-payment?

Taking some of the mystery out of credit scores!
Remember, the credit report is a “snapshot” in time, but it also encompasses a history of payment.

 

What is included to “come up” with a score?

• Past payment history including information from public records such as bankruptcies, foreclosures, judgments, tax liens, etc.
• Trade line repayment history
• Outstanding debt utilization
• History of credit establishment
• Type of credit being utilized
• Credit inquiries

I pay my bills.
But, are they paid AS AGREED? Paying your bills is very important, but creditors are looking for people with the financial discipline to pay their bills on time, as agreed.

 

What if I have collection accounts?
The myth is that after seven years a collection account will be dropped from your credit report. In reality what happens is that the collection agency will sell the account to another agency and at that point the seven years starts all over again. It is best that you make arrangements to settle on the collection accounts rather than to “hope” they will go away.

 

What about Student Loans that are in default?
Student Loans that remain unpaid NEVER go off your credit report. They will also keep you from qualifying for the Government Sponsored loans. So make arrangements for a repayment plan and STICK TO IT!

 

Do credit reports sometimes contain errors?
YES!

 

What can I do about errors?
It depends on where you are in home buying/financing and the potential impact of the errors.

 

Disputing Errors on the Credit Report
Supporting documentation is required – nobody will take your word for the error. You must dispute the item with EACH bureau that reports it. Send your request with supporting documentation using a return receipt request from the Post Office. Then you can confirm when the protest period began.

 

How long does this take?
Under the Fair Credit Reporting Act, 1997 the credit repository has about 35 to 40 days from the point at which the dispute is received by the credit repository to respond to the consumer’s inquiry.

But we don’t have that much time!
We can do a “Rapid Re-Scoring” for your Credit File. You must be able to supply written proof concerning the items disputed.

 

Confirm Changes have been made.
Obtain a new credit report with new scores. Scores can improve on average 25 to 100 points when significant errors are corrected! Timeframe can be as short as 36 hours once complete information has been provided.

 

Who can help me with a Rapid Re-Score?
We can! Once you begin the home ownership quest you cannot create any type of new debt. Do not apply for credit for anything. Make sure you keep current on all existing debt. Don’t get fired or quit, the last thing the lender will do is to reconfirm employment and obtain a FINAL CREDIT REPORT!

 

The Mortgage “Waterfront” and Rates – What kind of rate can I expect to get?
First understand that rates change DAILY, and different programs have rates that reflect the risk that the lender feels they would be taking in each circumstance.

• FNMA Conforming Loans – can have great rates, but the borrower must have excellent credit.
• "Not quite" FNMA eligible – can also get some great rates even with a few more credit issues! If you can qualify for one of the government sponsored programs such as FHA, VA or Rural Development.
• Some significant credit issues – You probably cannot qualify for a loan at this time.