Credit Advice for Home Buyers - 2

When you apply for a new loan, a job, insurance, etc., you may be subject to a credit check. What is on your report and your credit score may determine if you can buy a home, your interest rate on a loan, or insurance rates, and could possibly impact getting a job. So knowing and understanding what is on your credit report is important as well as your credit score.

FICO scores, which is the credit model most consumers seem to recognize, range from 300 - 850. A lender I spoke with yesterday told me that with his company, at this time, they will no longer be able to qualify someone to purchase home unless they have a minimum of 580 for a score. Even then, it may be tough.

There are three main bureaus that most creditors utilize to gain a credit report and credit score. If you need more specific information about a bureau or their report, please refer to their websites.

http://www.equifax.com/

http://www.transunion.com/

http://www.experian.com/

Understanding what is on a credit report:

Typically, your personal information is first. It will show basic information such as: name, address, previous addresses, employment history, etc. Be observant of this section as information here could help you determine if you have been a victim of identity fraud. Check for anything unusual such as an address listed where you have never lived. If you find any errors, contact the bureau.

Derogatory information usually comes next - Collection agency placements, Public records (such as bankruptcy, tax liens, judgements), and late payments on mortgage, car, etc.

Collection agency placements:

Accounts are usually placed with an agency when they have been charged off of a creditor's books. There are some companies that use collection agencies for pre-placement prior to write off, so be sure you understand what you are dealing with when you try to resolve.

If one of your accounts was placed with a collection agency and you have paid the bill, make sure it shows paid on the report. If it does not, then contact the agency and supply them with proof of payment. Once you have resolved the issue, it might be helpful to ask for a letter from them to show paid in full, in case this is needed in the interim until it gets corrected with the credit bureau. The collection agency contact information should be on your report along with the account number.

If you have not paid the bill, and it is owed, it is in your best interest to get the account paid or resolved, if you want to improve your score. Most collection agencies will negotiate a settlement for less that the full amount but understand that if you agree to that, it will show up as settled in full and not paid in full. If you can get them to agree to showing paid in full on your report, that is your best bet. Most agencies will also allow a payment arrangement so at least make a phone call to see what you can work out.

If one of your creditors placed an account with an agency in error, I would suggest calling the creditor first to get them to help you resolve the problem. They can have the item removed from the agency which will be eliminated from your credit report. If that does not resolve it, then contact the agency to let them know. They will in turn contact the creditor to try and bring resolution.


Public records:


This section will include any Bankruptcies, Tax Liens, Judgments, etc. that have been filed against you. Negative payment history can stay on your credit report for up to 7 years. However, Public records can stay on for up to 10 years.


If you have filed bankruptcy, many creditors will not even consider a loan until X number of years have passed. Each creditor will have their own criteria so check with each one to understand their policies regarding this. Some may allow a loan (car, home, etc) but will charge a much higher interest rate.


Tax liens must be cleared up before a home loan will be given so it is very important to always get these paid as soon as possible. Contact the IRS to see about making payment arrangements. Or check out their website to get more information - http://www.irs.gov/


Some companies submit their charge off accounts to collection agencies. Others take it a step further and file suit against you. If they take you to court, and get a personal judgment against you, this will show up on your credit report. Always try to resolve your payment issues prior to this step because a judgment is a more serious offense when it comes to impacting your credit score.


Of course, if anything is listed on the credit report that is incorrect, file a dispute with the bureau. You can do this in writing or online. Please check their individual websites for further information.

Please Note: The information I am providing is solely based on many years in the credit industry as well as much research. However, I want to be clear that I am not an attorney, so please consult your attorney for any legal advice.

Next blog will be about the impact on getting a home loan based on current negative payment history.

Have a wonderful day! Till the next time...

Diane

P.S. If you have any questions in the mean time, please feel free to email me at: diane@dianesfloridahomes.com and I will do my best to respond as soon as possible.

Visit my website: www.dianesfloridahomes.com
























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Credit Advice for Home Buyers - 1

Welcome to Diane's Florida Homes!

I am in the Real Estate Business in Orlando, Florida. I work with Buyers and Sellers, most often in residential - single family and townhome/condo purchases. I have a very extensive background in the Credit Industry (my previous career in the Corporate world) and thought maybe I could be of some help to those wanting to understand a little more about credit. The criteria for qualifying to purchase a home has changed. There are stricter guidelines now due to the large number of foreclosures, and many other factors, and understanding how your credit report and score factor in to the process, is very important.

It is such a great time to be a buyer, especially a first time home buyer, because you can buy a nice property at a great value, and still purchase with little or no down. However, the reason I decided to start this blogging adventure is, some of my potential clients are running into issues because of the newer lending practices. FHA loans were always the way to go if you had some credit issues. It still is, but there are things you should know, before you start applying for a loan. 620 seems to be the magic number as a minimum credit score to get a loan. There are exceptions to this and you will need a mortgage lender or broker to determine what these exceptions are.

If you are one of those who are starting to think about being a first time home buyer, my first recommendation is to start by pulling your credit report to see what you are up against. If you don't already know this, you can pull a free report from http://www.annualcreditreport.com/. If you want to know what your credit score is, you can purchase this as an additional option. But remember, if you only want your credit report, it is FREE! You are allowed 1 free report from each of the three credit bureaus - Equifax, Experian, and Trans Union, once a year.

Start by choosing a bureau and pull the report. When you are reviewing it, first check to be sure your information is accurate. Then start looking at each item listed and be sure it is an account you opened. If there is anything on there that is not yours, you can dispute it online. I would start with just one bureau so it is not overwhelming.

This is all I have time for today. Till the next time...

Diane
diane@dianesfloridahomes.com
http://www.dianesfloridahomes.com/