Credit Advice for Home Buyers - 3

Lenders are really tightening up their criteria so be aware that they are scrutinizing more detail of your credit report, than in prior years. I am finding that even being past due a few times on certain items will disqualify home buyers that in the past, lenders and/or underwriters would potentially overlook.

The first thing to remember is that anytime you miss a payment, whether it is a credit card, a mortgage payment, car loan, etc., it will show up for at least 7 years in your report. Even a small minimum credit card payment of 10.00, if missed, will be considered deragatory. So if at all possible, always pay at least your minimum to avoid this negative hit on your report.

Here is an example of what your report may look like in regard to payment history:

12/08 - 111111111111

What this would mean is that the last time it was reported, was in December 2008. All "1's" is a good sign that you have paid your bills on time. However, let's say you missed a payment in November 2008 and it was considered 30 days past due, this is how it would appear:

12/08 - 121111111111

The numbering system starts with the last reporting month and works backward. The first number would be Dec. 08, the second would be Nov. 08, the third Oct. 08 and so on.

1 = current - paid on time
2 = 30 - 59 days past due
3 = 60 - 89 days past due
4 = 90 - 119 days past due
5 = 120 - 149 days past due
6 = 150 - 179 days past due
9 = creditor charged off account.

Typically, when the account has been charged off by a creditor, they will forward the account to a collection agency. However, all creditors have their own policies so be sure to check with your individual creditor to understand what has happened to your account debt.

Right now, lenders are putting much emphasis on late mortgage payments and car loans. If at all possible, always pay these on time, or at least prior to the late date of the creditor. In some instances, you can give an explanation to an underwriter on why an account is in collection or past due, and they may make an exception. But I am finding they are not being too flexible when it comes to a late on a mortgage or car loan.

This is all I have time for today, but I promise I will be back sooner than last time. If you have any questions, please feel free to write me at diane@dianesfloridahomes.com.

Have a wonderful day!

Diane
www.dianesfloridahomes.com