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QUESTIONS AND ANSWERS
HOW DOES A MORTGAGE LENDER DECIDE TO LEND ME MONEY FOR A NEW HOME? Your personal credit report is the
single most important factor in determining whether you get approved for a loan.
A substantial income and down payment will not always overcome bad
credit. Creditors use a credit
scoring system to determine whether you’re a good credit risk.
Among the many factors that they take into account, the creditor examines
your credit history to look at your income, whether you currently own a home,
how many years you’ve worked at your job and how promptly you’ve paid your bills
in the past. Each factor is given
points-the more points you have predicts to the creditor how likely it is that
you’ll pay back the debt.
IF I’M TURNED DOWN, WILL THEY TELL ME WHY?
Although
creditors are not required to tell you the factors and points used in the
scoring system, they are required to tell you
why
you were rejected for credit. For
example, if a creditor says that you were denied because you haven’t worked long
enough at your current job, you might want to reapply after you’ve been at the
job longer.
CAN I PURCHASE A HOME WITHOUT AN “A” CREDIT RATING? Yes. It is possible to purchase a home with B, C, or below credit, but more often than not, you will pay higher interest rates on your loan and will need to put down a larger down payment. So although you can still get into a house without stellar credit, it’s always best to do what you can to improve your credit situation.
CAN INFORMATION BE CHANGED OR REMOVED FROM MY CREDIT REPORT? Yes.
Thanks to the Fair Credit Reporting Act, if information cannot be verified (even
if the information is correct!) by the credit bureau within 30 days of your
request, or if items on your report are not 100% accurate, they must be removed.
Don’t
dispute more than two items at one time, and then wait at least 60 days before
disputing any more items. If you
dispute everything in your file at one time, the bureaus will suspect that you
are attempting credit repair. Never tell the bureaus that you are attempting credit repair-especially if you plan to challenge them on the accuracy of the report. The federal law provides the bureaus with an escape and allows them to dispute your challenges as frivolous from the start.
The Federal Law allows you to
include a 1000-word explanation of negative credit items right in your credit
file, so that anyone who checks your credit can read “your side of the story.”
NEVER use this method!
First, if anyone even reads your letter, no lender is going to accept your side
of the story over another lender’s.
Second, your FICO score will be completely deleted.
Your FICO score is an underwriting guideline that lender’s use to
determine what kind of risk you are.
The higher your FICO score, the better risk you are-so if you have NO FICO
score, the obviously, your chances of rejection are guaranteed. If you feel the need to explain your circumstances to a potential lender, write a letter directly to them when you make the application for a loan. They are more likely to read it and take it more seriously.
I TEND TO ALWAYS ACCEPT LOW
INTEREST-RATE CREDIT CARD OFFERS THAT I GET IN THE MAIL, SWITCHING BALANCES
ABOUT 4 TIMES A YEAR.
CAN THIS HARM MY RATING?
Yes.
Creditors keep an eye out for consumers trying to open too may accounts in a
short period of time. Although you
may want to take advantage of low credit card interest rates, the only thing
that creditor sees is applications for four new credit cards.
This often can be viewed as negative.
The safest route is not to make this a habit, but if it’s too late, just
don’t apply for any credit for several months prior to applying for a mortgage.
WHAT CAN I DO TO STOP GETTING THESE UNSOLICITED CREDIT CARD OFFERS?
Call each of the three credit bureaus and request to be taken off their
marketing lists.
Equifax Options
800-556-4711
Trans Union
800-680-7293
Experian Credit Marketing
888-567-8688
I’VE BEEN LATE SEVERAL TIMES IN
PAYING OFF A CREDIT CARD ACCOUNT, AND LATELY, HAVEN’T PAID
THEM IN FOUR MONTHS. I’VE STARTED GETTING REALLY HARASSING PHONE CALLS FROM A
COLLECTION AGENCY AT HOME AND AT WORK. IS THERE ANYTHING I CAN DO TO MAKE THEM
STOP CALLING ME–BESIDES PAYING OFF THE DEBT?
Yes. You can stop a collection agency from calling
you by simply writing them a letter telling them to stop. It’s the law! Your
credit card company transferred your file to a collection agency when they
couldn’t get payment from you, so in your letter, tell the agency that you
didn’t borrow the money from them and you’ll only negotiate with the original
creditor. Also tell tem that if they don’t stop contacting you, you will inform
the State Attorney General’s Office and the local office of the Federal Trade
Commission of the abuse. Ninety-nine percent of the time, the collection agency
will send your file back to the original creditor and not bother with you any
more.
This doesn’t mean that you don’t still owe the
money, but it will stop the harassment. At this point, you can try the
compromise technique discussed below with the credit card company.
IF I PAY OFF MY DELINQUENT
ACCOUNTS, WILL MY CREDIT REPORT GREATLY IMPROVE?
Although it is a good idea to pay off your debt,
you need to do it the right way.
If you’re going to pay off your debt, you need to
negotiate and compromise with the creditor. Tell them of your intentions to pay
off the debt, with one condition–that all negative information be removed from
your credit file. Demand a letter from the creditor agreeing that they will
report to all three credit bureaus that the account is 1) paid, 2) current, and
3) never late.
WILL FILING FOR BANKRUPTCY START ME
ON A CLEAN SLATE?
No. Once you file for bankruptcy, every creditor
that you bankrupted out on will be listed on your credit file for 10 years. If
you can get credit at all after this, you will pay much higher interest rates
for all of those 10 years. And with most lenders, you won’t be able to get a
home loan for at least two years.
If you are considering filing for bankruptcy,
contact your creditors first to see what sort of compromise you can reach. Tell
them that you would like to establish a plan to pay off your debt–and start at a
negotiating percent, like 10% of the debt (you’ll probably have to go up to
about 50%, but 10% is a good start). If they hesitate or begin to argue, inform
them of your plan to file bankruptcy if an agreement can’t be reached.
Bankruptcy means that they won’t get any money-this should make them a little
more agreeable to reach a compromise.
For help with your Home Mortgage, Please call me
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