All posts in Credit

Mortgage Inquiries & How They Affect Your Score

by Justin Miller on December 7, 2011 in Credit with No comments

There are a lot of misconceptions on inquiries and how they affect your credit score.  This is from MyFico.com and that is the scoring model we as banks use :

Does the formula treat all credit inquiries the same?

No. Research has indicated that the FICO score is more predictive when it treats loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans, the FICO score ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping. In addition, the score looks on your credit report for rate-shopping inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.

What to know about “rate shopping.”

Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping. In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.

Credit Complaints & Where To Take Them

by Justin Miller on October 19, 2011 in Credit with No comments

I am not an expert by any means when it comes to disputing items on your credit report but I did recently read something interesting in Kiplingers magazine about credit complaints.

Normally you have to take hyour complaints to the credit card company itself or dispute it at http://www.transunion.com/, http://www.equifax.com,/ or http://www.experian.com/.   Now the article states tht the Consumer Protection Bureau has opened a one-stop complain center for all credit card related issues.  In order to register you will need to go to their home page at http://www.consumerfinance.gov/ and click “Submit a Credit Card Complaint.”

“Once you have registered your complaint, you can check its status online.  If the issuer does not respond in a timely manner and resolve teh complaint satisfactorily, and the CFPB receives a number of similar complaints, it will likely launch an investigation.  It’s too soon to tell how well this complaint process will work, but we’ll keep you posted.”

What You Need To Know About Your Credit Score

by Justin Miller on June 21, 2011 in Credit with No comments

So many consumers will pull their credit score online and when they go to apply for a mortgage they find out the score the bank pulled is different then what they got on the internet.  The reason for this is because most of the time when someone pulls their credit score online they are only getting it from one of the 3 credit bureaus.  Mortgage companies need to go off of the middle of the 3 credit scores.

The other reason it will differ is because of the different scoring models.  Most likely when you pull your credit score online it is with the Vantage scoring model which goes up to 950.  We as banks pull using the FICO scoring model which goes up to 850.  That is why it is so important to get pre-qualified in advance because there can be discrepancies between what you think your credit score is and what actually ends up being used which depending on the score could cost you thousands of dollars. 

For more information contact me and I will send you a handbook on what your creidit score means to you as a prospective buyer.

Short sales and foreclosures equally lower FICO scores

by Justin Miller on April 24, 2011 in Credit with 1 Comment

I don’t pretend to be a credit expert and make sure to always consult someone who is but I found this to be a informative article especially since so many are experiencing short sales and foreclosures.

A short sale is better over time as long as you don’t have a deficiency judgment for the loss that the bank took with the sale.

“FICO said homeowners with short-sales and foreclosures on their records ended up with similar credit scores, assuming their scores were similar as distressed homeowners (see illustration below).”

http://www.housingwire.com/2011/04/22/short-sales-and-foreclosures-equally-degrade-fico-scores

A Foreclosure & How It Affects You Buying Another Home

by Justin Miller on September 27, 2010 in Conventional Loans, Credit, FHA Loans, Foreclosure, Mortgage Education 101, Short Sales, VA with No comments

Here is how you are affected when doing either a short sale or foreclosure.  A short sale is always going to be better than a foreclosure.

On a Conventional loan with Financial Mismanagement it is as follows:

  • Foreclosure – 7 years
  • Deed-in-Lieu of Forecloure/Short Sale/Pre-Foreclosure is 2 years with a minimum of 20% down.
  • Deed-in-Lieu of Forecloure/Short Sale/Pre-Foreclosure is 4- 7 years with a minimum of 100% down.

If you can show an extenuating circumstance than all of the above goes to:

  • Foreclosure – 3 years and up to 7 years with 10% down
  • Deed-in-Lieu of Forecloure/Short Sale/Pre-Foreclosure is 2 years with a minimum of 10% down.

Fannie Mae defines a unique hard ship as:

  • is unlikely to re-occur and is not a natural or manmade disaster;
  • is temporary in nature or of limited scope, but impacts many borrowers;
  • may involve property damage, hazard in the dwelling, or other adverse property conditions;
  • creates financial hardship that impacts the ability of the borrower to continue making payments on the mortgage loan;
  • may involve uncertainty regarding whether insurance will cover the losses incurred; and
  • has been designated as a “unique hardship” by Fannie Mae.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/svc1011.pdf 

FHA requires 3 years and VA is 2 years.  FHA & VA does have a short sale waiver, see attached on pages 4-5.   There are exceptions to a short sale on an FHA or VA loan, Short Sale Policy Waiver.

The years and guidelines mentioned above are subject to change without notice and can vary from bank to bank.

Credit Score Tips For The Best Mortgage Rates

by Justin Miller on May 28, 2010 in Credit, Mortgage Education 101 with No comments

Just as the article below states there is so much to know about improving your credit score.  It is important to keep your credit card balances below 30% of your credit limit.  Another is to not pay off a collection account in the middle of trying to get a loan. 

Credit reports are going to play an even bigger role starting June 1st due to Fannie Mae’s new Loan Quality Initiative (LQI).  Starting June 1st lenders are going to have to confirm that the borrower did not take on any new debts.  In order to prove this did not occur we are going to have to pull a new credit report right before closing.  I am not sure if we will be pulling updated credit scores as of yet but what I can tell you is to not use your credit cards, buy a new card, apply for a credit card, etc. once your loan has started.  Keep your credit report the same way other than making your monthly payment on time or paying down your debt.  Do not close out any account either. 

I just listed to a conference call yesterday on credit reports and they talked about how with a short sale you want it to show up as a paid account, not settled for less than owed, etc.  On loan modifications, your credit score will take a hit as of right now.  Very shortly they are going to change the credit score code from the current of AC, which does hurt your score, to CN which will not hurt your score as long as your loan has been paid on time.  If you got a loan modification and have paid it on time but your score has been impacted ask your mortgage servicer to change the code from AC to CN. 

I have a great handout that I can email to you if you want a lot of great information on credit reports and scoring.  Just send me an email with the subject loan “Credit Report Handout” and I will send you a copy.

http://www.marketwatch.com/story/credit-score-tips-for-the-best-mortgage-rates-2010-05-28?siteid=rss&rss=1

Life After Foreclosure

by Justin Miller on May 28, 2010 in Credit, Foreclosure with No comments

How long will you have to wait in order to buy again?  It is going to depend on whether you can show a true hardship or not versus someone who just walked way, a strategic default.  Another part that is going to play a large part is how much you are willing to put down.

Fannie Mae recently released their new guidelines for distressed sales such as a short sale.  The new guideline basically says the more you put down the sooner you can buy a home. 

Whether or not you had a true hardship is going to be to the underwriter’s discretion and I would have to imagine you better have a lot of documentation to back up the fact that you didn’t just walk away such as a job loss, health issues, a huge decrease in income, etc. 

There is no telling what the future of mortgages holds for us but make sure to pay all of your other bills on time, start saving money for a down payment, and look into getting your credit repaired if it needs it.

http://money.cnn.com/2010/05/28/real_estate/homebuying_after_foreclosure/index.htm?section=money_realestate&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_realestate+%28Real+Estate%29&utm_content=Google+Reader

Credit Card Disputes

by Justin Miller on May 26, 2010 in Credit with No comments

It looks like Federal law allows it as long as you file the complaint correctly.  I don’t have a lot to say on this because I don’t know much about it but I did find the article very informative.

For example, to challenge a “billing error” as defined under the Fair Credit Billing Act, or FCBA, you must send your dispute letter to the address for billing inquiries within 60 days of the first statement that contained the mistake. The issuer must acknowledge the complaint in writing within 30 days after receiving your letter, investigate the claim and resolve the dispute within two billing cycles or 90 days, whichever comes first.

http://www.bankrate.com/finance/credit-cards/how-do-i-win-a-credit-card-dispute.aspx

Should You Payoff Closed Credit Cards

by Justin Miller on May 21, 2010 in Credit with No comments

The answer is no and you might want to call the credit card company right before you pay it off to ask them to reopen it.  It is always good to talk to an expert because each individual’s situation is different.  I am not an expert. 

http://www.marketwatch.com/story/steps-to-a-higher-credit-score-can-be-mystifying-2010-05-21?siteid=rss&rss=1 

Last Minute Credit Reports On Mortgages

by Justin Miller on May 17, 2010 in Credit, Mortgage Education 101 with No comments

This isn’t meant to scare anyone nor should it have an adverse affect on the industry.  It actually could be a good one because it is more due diligence that the banks are doing to make sure that borrowers aren’t taking out loans or credit cards that they don’t know about. 

If you continue to pay your bills and not take on additional debts you will be fine.  I am very confident if a credit score drops a few points it won’t change the loan unless it is due to a derogatory item.  Make sure to not be running up your credit cards or opening new accounts.

http://www.housingwire.com/2010/05/17/lenders-likely-to-order-second-last-minute-credit-report-before-closing-on-a-mortgage/?utm_source=rss&utm_medium=rss&utm_campaign=lenders-likely-to-order-second-last-minute-credit-report-before-closing-on-a-mortgage 

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