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Credit Repair Myths Busted

7 Credit Repair Myths Busted

By | Credit Repair

The first step toward repairing your credit is educating yourself on credit repair myths. For most people, the Internet is the easiest way to access that information. But as with any other common financial problem, you’ll find that the Internet abounds with misinformation and services that, unfortunately, might actually cause more harm than good. We’ve rounded up the most popular credit repair myths so you can save yourself from more unnecessary financial angst.

Credit Repair Myths:

Myth #1: If you pay off your debts, those negative items will dissolve from your credit report.

Paying your debts will increase your credit score, but the damage may already be done. Negative credit items remain on your credit report for seven years, which is a very long time to wait. Especially when you’re facing denials for loans or higher interest rates because of your credit history. The only other way to get an item removed is if you believe it to be inaccurate or outdated. In that case, you can hire a service to dispute the information with the credit bureau or undertake the process yourself. Resolving to pay your debts on time will go a long way toward boosting your credit profile, but it won’t rid your score of the effects of the “bad” debts.

Myth #2: Credit repair companies are a scam.

This is the most popular question when it comes to credit repair myths. Not all credit repair companies are created equal, but legitimate and well-respected companies do exist. Successful and reputable credit repair companies will have a trained analyst review your credit report, discuss any questions and concerns you may have, and go to work on your behalf with the credit bureaus to dispute incorrect or outdated information that is hurting your credit rating. Although you could commence the process yourself, you may choose to save considerable time and energy by handing the reins to a trained professional.

Myth #3: Bankruptcy is my only option.

Bankruptcy should be viewed only a last-resort. Bankruptcy might provide an immediate fix to a devastating financial situation, but your credit score will take a while to recover. Before you take this leap, make sure you have investigated all of the possible options available to you — and better yet, speak with a trained credit counselor who can possibly point you in a direction better suited to your financial situation.

Myth #4: You won’t see improvements in your credit score for a very long time.

Change isn’t going to happen overnight, but it may happen faster than you think. Credit bureaus will generally make marks to credit scores every 30 days, and hard inquiries (a credit check done by a lender when you’re trying to open a new account, for instance) are reported soon after they occur. You might see some small changes if you check your credit report once a month, and more significant improvements will be visible within the first year of working to repair your credit situation.

Myth #5: Negative items can be added back to your credit report.

You may have heard that credit bureaus can add negative events back on your credit report after they’ve been removed due to a dispute. The only way that can happen following a dispute is if the credit bureau finds out that a debt may be valid after it has been contacted to remove the item for being incorrect or outdated. But in most cases, items erased from your credit report won’t make a reappearance.

Myth #6: You’re better off repairing your credit on your own.

You can, of course, gather all of the necessary information, write to the credit repair companies, and request removal of any items that you believe to be erroneous. This does, however, require a great deal of patience, as well as legal and financial finesse. That’s why it’s a good idea to hire a professional, who is trained to negotiate with the credit bureaus and secure the best possible outcome for you.

Myth #7: Credit reports are generally accurate.

Errors are more common than you’d think. A 2012 study from the Federal Trade Commission revealed that one in five Americans have been plagued with an error on their credit report. Most people make it a habit to review their credit card statements monthly to ensure they recognize all charges. The same should be true for your credit report — because you never know what incorrect and damaging information could be affecting your credit score.

It can be tough to separate fact from fiction when you’ve resolved to repair your credit. At Ovation Credit, we are standing by to help answer your questions about your credit score and reports. Contact us today to learn more about how we can help you build a stronger financial future.

Build, Grow & Repair Credit

By | Your Credit

Whether you’re new to having credit or you’ve had credit cards for years, growing your credit, protecting it and repairing your credit takes work. This guide can help you manage all of your debts and improve your credit score.

Topics in This Guide:

Build or Rebuild Credit at Any Age:

  • Access and Review Your Credit Reports
  • How High Balances Affect Your Credit
  • How Long Does it Take to Repair Credit?
  • How to Avoid Paying Credit Card Interest
  • How to Improve My Credit Score
  • How to Repair Credit Mistakes
  • How to Repair Credit When You Don’t Have a Job
  • Identity Theft and Your Credit
  • Using Your Tax Refund to Pay Off Credit Cards

Credit and Mortgages/Refinancing a Home:

  • How to Pick the Best Type of Mortgage
  • Refinancing a Home and How it Affects Your Credit

Let’s begin!

Build or Rebuild Credit at Any Age

If you’re in college, you might ask yourself, am I “too young” to start building credit? The best time for credit-building is when you have a reliable job and pay your bills on time every month.

Your credit report is the history of your credit payments, and items stay on your reports for up to 10 years, or longer for student loans. Typically, you’ll have credit cards, lines of credit, student loans and installment loans. To build credit, use credit moderately and pay the balances quickly.

Access and Review Your Credit Reports

You can receive a free credit report annually from AnnualCreditReport.com using a secure, private computer. You need to enter your social-security number, address and date of birth. Then you can view credit reports from Experian, TransUnion and Equifax and make copies of your report. Remember never to save it on a public computer.

Familiarize yourself with your credit report. It shows accounts that are open, closed, paid-off and in collections. It also gives your payment dates. It may include student loans, installment loans, bankruptcies or other accounts.

Tip: You can access a free credit report from AnnualCreditReport.com.

How High Balances Affect Your Credit

When you carry high debts, you can damage your credit score even if you pay minimum balances on time. High balances let creditors know that you might be struggling to make payments.

How Long Does it Take to Repair Credit?

To repair your credit, businesses have 30 to 45 days to respond to disputes. After that, disputed items like collection accounts are removable.

How to Avoid Paying Credit Card Interest

If you pay your full balance each month, then you won’t have to pay interest. Always pay on time to avoid late fees.

How to Improve My Credit Score

Your credit-card payment history makes up 35 percent of your credit score. To improve your score, keep your balances low. Pay on time and never let accounts go into collections or charge-offs that are 180-days past due. If you fall behind, then make the payment as soon as you can.

How to Repair Credit Mistakes

Maybe you’ve done a search online for “how to fix my credit.” First, review your credit reports and flag anything that you don’t recognize or anything older than seven years. To dispute credit mistakes, select the option “dispute” when your credit report is open and give the reason. For example, maybe you don’t recognize the account, or it’s older than seven years.

Creditors have 30 to 45 days to respond, but you might hear back from them sooner. If they don’t respond, then you can often remove disputed items from your account’s report.

How to Repair Credit When You Don’t Have a Job

If you’ve lost your job and fallen behind on payments, talk to the collection agencies about making smaller payments. You may be able to remove collection accounts older than seven years if you dispute them on your report. Never discuss bills older than seven years with collection agencies because any correspondence reopens the account.

For further help, check with Ovation Credit for credit-repair assistance.

Identity Theft and Your Credit

If you want to know how to dispute credit report charges you don’t recognize when you’re on a credit-report site viewing your report, then select the option to “dispute” on your screen and give further details.

If anyone has stolen your identity, then contact the credit-reporting bureau and your credit-card company. You may need to file a police report to block any further fraudulent transactions on your account. Having a company that monitors your credit is very beneficial to avoid situations like this.

Using Your Tax Refund to Pay off Credit Cards

Use tax refunds to pay off credit-card debts. The average refund is $3,000, and you’ll improve your credit score. With better credit, you can get lower interest rates.

Credit and Mortgages/Refinancing a Home

How to Pick the Best Type of Mortgage

To pick the best mortgage, talk to your bank about mortgage options. FHA mortgages or those by the United States Department of Veterans Affairs can be more-affordable options. U.S. Department of Agriculture mortgages and the first-time buyers program are also worth considering.

Refinancing a Home and How it Affects your Credit

Refinancing your mortgage is taking out a new loan to replace your current loan. People take this step to lock in lower interest rates. When banks run a credit report, it can lower your score slightly. If it’s only one inquiry, then it may not affect your credit that much.

Bottom Line

Credit cards often lead to debts and huge responsibilities. By paying your credit-card bills on time, you can have a good credit score and better interest rates for years to come!

References:

www.nerdwallet.com/blog/mortgages/how-to-choose-the-best-mortgage/

http://blog.credit.com/2017/10/my-debt-was-charged-off-what-does-that-mean-120856/

 

Short Sale vs. Foreclosure and Your Credit

By | Mortgage

Financial trouble can be disastrous for American homeowners. After missing four to five mortgage payments, a lender will typically foreclose on your mortgage. This puts you out a home and results in a hefty bad debt showing on your credit file. Meanwhile, a short sale is an “exit strategy” that lets you pay off as much of the debt as possible.

Short Sale vs. Foreclosure

How a Short Sale Affects Your Credit

It is common knowledge that a foreclosure is bad for your credit score. But a short sale is an alternative that can reduce the amount you have to foreclose. Accomplishing this will require selling the home before the foreclosure takes place. When this is an option, it can result in much less bad debt showing on your credit report.

The short sale will still lower your credit score for a long time. This entry can stay on your credit report for up to seven years. You can lose anywhere from 85-160 points, depending on your current FICO score and the severity of your short close. The majority of your score drop will go away within two years if you sustain good credit otherwise.

No Late Payments on a Short Sale

Are you aware that you will be unable to pay for your mortgage in the near future? For example, you might be going through divorce procedures and realize that the home is too expensive for either party to uphold. It makes sense to do a short sale at this point, but what does it mean for your credit score if you avoid late payments?

The biggest benefit is that you will not have late payments on your credit report. Your first late mortgage payment can drop your FICO score by 90-110 points. The actual damage depends on your score before the late payment; for example, if your score is 730, this number could drop below 650 after your first missed payment.

Now, there are two problems that interfere with this happy ending:

  1. Sometimes You Need Late Payments

While not always the case, many lenders will require you to run late on your mortgage payments to qualify for a short sale. That requirement exists for FHA home loans, which need to be a minimum of 31 days late by the time the sale closes. Otherwise, FHA will not approve the transaction. This means you need to withstand the FICO score drop that comes with running late on a mortgage payment. Thankfully, this not a requirement if your mortgage is through Fannie Mae or Freddie Mac.

2. Your Home Has to Sell Pretty Fast

After 90 days or so, there will be more pressure to perform a “deed in foreclosure,” which works the same as a voluntary repossession. This entry factors into your credit report the same as a foreclosure, which means it is more harmful to your credit score than a short sale. Thus, your home needs to sell pretty fast or else the benefits of a short sale are minimal.

You can always take action to make the voluntary repo show better on your file. The main thing is to request the entry to show as “paid as agreed,” on your report. If the lender does not comply, you can then ask for it to be marked as “settled,” or “unrated.” These are all better entries than “foreclosure,” which is a reporting option for your lender.

How a Foreclosure Impacts Your Credit Score

A foreclosure is a more serious way of handling an unaffordable mortgage. You are giving up the debt and the lender must assume full liability. A short sale can let you capture on any real estate market gains to mitigate some of the losses. The remainder (“the deficiency”) is all you are left on the hook for, although some creditors will sue you in court for these funds.

But, with a foreclosure, you are effectively walking away from your mortgage in the most irresponsible way possible. There is no chance to determine the value of your home and the amount of bad debt becomes your entire mortgage balance. This means failing to short sell when running late on payments during a hot real estate market can be costly.

FICO Score Change from Foreclosing

You can expect your FICO score to drop by anywhere from 85-160 points depending on the specifics of your foreclosure. This typically happens when you run many months late, and by the time the debt closes, you will certainly have a 120-day late entry on your credit. This late payment entry holds longer than a single 30-day late payment; while a short sale will mostly age off after two years, a foreclosure will weigh your FICO score down for longer.

A foreclosure often comes with more serious financial struggles than a short sale, because short selling is pre-foreclosure and comes with foresight. Doing a short sale of your home can prevent you from going bankrupt at times. If your foreclosure pairs with a bankruptcy, your FICO score could drop by as much as 240 points.

Conclusion: Go for a Short Sale When Possible

The truth is that your score will suffer for at least two years, regardless of what you choose. The short sale will be less damaging, though, and it will not be as hard to keep building your credit as it would be after foreclosing on your home.

Remember that large FICO score drops occur from late payments, foreclosures and short sales alike. But it is the reporting terms that decide how severe the drop is and how long it takes to recover.

Sources:

https://blog.equifax.com/credit/can-one-late-payment-affect-my-credit-score/

http://homeguides.sfgate.com/fha-guidelines-short-sale-2478.html

https://www.thebalance.com/deficiency-judgements-after-foreclosure-1798478

http://homeguides.sfgate.com/much-credit-score-decrease-foreclosure-1417.html

https://www.thebalance.com/how-much-will-bankruptcy-hurt-

Credit Report Errors: Why, How and Solutions to Fix My Credit

By | Credit Reports

Credit report errors can happen to anyone. It affects roughly 25 percent of files in the United States. This statistic is high enough to cause alarm, and one in 20 files have errors that cause financial damage. A small percentage of these instances involve borrowers with wrongfully reduced scores of 100 points or more.

Credit Report Errors

Check for Credit Report Errors First

If you’re concerned, check each of your credit reports (Equifax, Experian and TransUnion) to see if there are any incorrect entries. Begin by scanning for information that doesn’t line up properly. There might be different balances, payment dates or your account might not even show up.

Keep in mind: credit-reporting companies are only required to provide information to one of the three bureaus. It’s possible to have details and accounts on one file that aren’t on the others. This is a leading cause of credit report errors and it’s not always easy to fix.

You can get your files from www.AnnualCreditReport.com, the government-authorized source for your free annual report. This is a right for American consumers, thanks to the Fair Credit Reporting Act (FCRA). If you’ve already requested a file and you want more current information, you can pay a nominal fee to each bureau for a fresh copy.

Common Types of Credit Report Errors

Sometimes, a credit report error is because of an innocent mistake by one of your credit card providers or lenders. Other times, it might be a mishap with your work’s accounting department. Worst case scenario, the errors on your report are a sign of credit fraud or identity theft.

Regardless of the details, any wrongful entries on your credit report should be taken care of immediately. If not, it’s possible for the negative effects to carry on for years — while keeping your credit score down in the process.

Take a look below for some tips on clearing up certain types of errors.

How to Handle Mismatching Credit Reports

Unfortunately, you can’t force the reporting company to notify the other bureaus if they only reported to one. This can put you at both an advantage and a disadvantage.

It’s beneficial if you have negative items and they only show on a single file. However, it can be a serious setback if your positive items are not there. It can result in your FICO score dropping — which means more rejections and higher interest premiums.

Your best bet is to contact the credit-reporting agency. You can request that they report to the other bureaus. If they won’t, there’s little you can do, “by force,” to make it happen for you.

How to Remove Outdated Information

Your credit report can only contain negative items for a set time frame. After the period runs out, you’re allowed to request removal of any items that still show. To do this, you must send a dispute letter to the respective credit bureau(s). This is also the standard process for dealing with errors. Outdated information is different since it’s so easy to check and prove, so no further information is needed.

You’ll hear back in 30 days or less with a decision. If you have a delinquency stated on your file, inside the acceptable reporting period, you’ll have to prove to the bureau that it’s incorrect. In most cases, this happens when debt goes to a collections agency — as it gets reported with a delinquency, inaccurately, on a more recent date.

How Long Does It Take to Fix Errors?

The FCRA states that the credit bureau you send the dispute letter to must get back to you within 30 days. They’re required to investigate your claim and determine whether there’s any accuracy to it. The simpler issues tend to get fixed right away, but it’s possible you’ll be asked for more documentation.

Should You Use Credit Repair Services?

Credit repair companies focus on fixing your credit report, not your score. The goal is to make sure that all information matches up between each of your credit files. It means an expert will work with you to go through all your credit reports. They’ll have a much better eye for finding errors.

However, most of the time, you can identify the errors yourself. It only becomes important to consider hiring a credit repair agency when fixing the problem. This will save you a good 30-60 hours in paperwork, phone calls and other tedious processes. It also means you have a greater chance of removing the error, as your case will be represented as best as possible.

Credit report errors are always a headache. However, you don’t have to stress over the situation too much. Credit repair professionals can take all the manual work out of the reparation process. The law is also by your side when it comes to removing inaccurate negative items.

Things will only get more confusing if you’re dealing with fraudulent entries. In this case, you might need to supply police reports, FTC Identity Theft Affidavits and much more. The problem could take 100s of hours to resolve as well, which is when a credit repair expert can really save the day.

Sources:

https://www.consumer.ftc.gov/articles/0155-free-credit-reports

http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same

https://www.creditkarma.com/article/credit-report-differences

https://www.thebalance.com/removing-old-debts-960491

https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report

http://www.cnbc.com/id/100449912

Credit Changes After Co-Signing a Loan

By | Loan

Co-signing on a loan is a big decision. You are putting your name on something that is not even for yourself. It requires trusting the other party to be as responsible a borrower as you are. This can be disastrous, but sometimes it works out okay.

Co-Signing Loan

Regardless, there are implications to your credit profile. Your score could drop, and you could even be left on the hook for the balance. If the other applicant fails to repay and the debt goes to collections, it can really hurt you.

Here’s typically what happens when you co-sign.

Applying Results in a Hard Inquiry

Your credit score has an initial drop from the hard inquiry. This occurs when your credit file gets pulled by the lender to see if your creditworthiness can secure the loan. Typically, your score will drop anywhere from 5 to 25 points after one or more hard inquiries in a specific time frame.

This factor is pretty negligible. Your credit score will lift back up soon after, as long as the loan gets repaid on time. Hard inquiries also only stay on your report for two years and usually impact your credit score for no more than one year.

Your Credit Report Gets a New Account

Assuming that the co-signed loan is approved, there’s now a new account showing on your credit report. How it appears will depend on the specific loan. But, in most cases, it will be an installment debt. This means the borrower must pay a fixed amount across so many intervals of time.

This type of debt will post as the full balance until it’s paid entirely. If it is a one-time need, the goal should be to cover the debt right away. The longer you carry the co-signed loan on your report, the more your score gets calculated with higher debt balances.

As with any debt, the credit reporting agency will notify the bureau every so often. Any payments made on time, or late, will get marked both on the credit report of the co-signer and the borrower. This late payment can impact the credit score of both parties. If it is your first late payment, it could mean 100 points or more lost.

Credit Utilization Ratio — How Does It Change?

Thankfully, co-signing on a loan is not the same as helping someone get a credit card. These installment debts will not play a role in your credit card utilization rate. This means that the second-biggest factor of your credit score will not be harmed. Since 30 percent of your FICO score depends on your credit utilization stance, this is a very good thing to realize.

However, while it doesn’t hurt your utilization rate, it almost does in the perspective of a new lender. Assume you try to qualify for a mortgage: Suddenly, the total debt you carry is higher. If you qualified for a $160,000 home loan prior to co-signing a $15,000 line of credit, now, until it gets paid, you might only be approved for $145,000.

Worst Case Scenario — Credit Score Damage From Co-Signing

By being eligible to co-sign, chances are you take your creditworthiness seriously. The amount you help someone borrow might be negligible versus what you can already borrow yourself. If so, the worst case scenario is that you have to pay the debt yourself — including any interest and penalties.

However, the damage is more crippling if you are unaware of payments in arrears. It is imperative to communicate with the borrower. You need to know if there will be a late payment — so you can prevent it from happening in the first place. As mentioned earlier, your scores could drop 30 to 100 points or more after just one 30-day late entry on your credit report.

Thankfully, there’s a bit of power for the co-signer. You have the right to request monthly statements. This is the simplest way to ensure payments are always made on time, and if a missed payment occurs, you can act on it quickly.

Your credit score will already have enough downward pressure. Just look below at how your co-signed loan can weigh in on some of the main credit rating factors:

  • Payment history: 35% of your FICO score depends on your payment history. Any late payments can be severely damaging to your score. A single missed payment could drop your score enough to cost you tens of thousands, especially if you plan to refinance your home soon. Your next loan will get approved with a lesser score, subjecting you to worse interest rates than normal.
  • Credit age: 15% of your score is made up of the length of your credit history. This new account is fresh and will influence a lower average age for your open accounts. It will close at some point and no longer be a factor. Regardless, while the account is open, it will only reduce the average credit age of a co-signer.
  • New credit: 10% of your score is also fundamentally backed by your new credit. FICO looks at whether you can really afford any new debt you take on. There might be large loans in your name already, and your credit score qualifies you as a co-signer. Yet, you might not be seen as someone able to afford more debt right now. Even though it is not technically yours, it is for this part of your score calculation — which is risky.

Conclusion

Co-signing a loan might not hurt your credit profile as much as you think. It’s more of a concern if you plan to finance a big purchase in the near future. But, absolutely never co-sign unless you trust the other borrower. Also, make sure to have funds available elsewhere in case you suddenly need to pay the loan off to save your credit.

Sources:

https://www.credit.com/credit-reports/what-is-a-hard-inquiry/

http://budgeting.thenest.com/late-payment-affect-cosigner-24854.html

https://www.thebalance.com/how-will-a-late-payment-hurt-my-credit-score-960543

http://www.creditcards.com/credit-card-news/help/5-parts-components-fico-credit-score-6000.php

http://www.moneycrashers.com/cosigning-loan-reasons-risks/

Understanding Your Credit – Score, Reports and Bureaus

By | Credit Reports

Understanding Your Credit

Most Americans do not realize how credit scores, reports and bureaus actually work. In fact, 42 percent believe the myth that lenders must report to all three major credit bureaus. This is wrong and causes a huge headache at times. The truth is that your score could vary by as many as hundreds of points between your files at each of the bureaus.

This is just one of many examples of credit misinformation. When you research how credit works, there is a web of knowledge to uncover. It all helps you become a better borrower, as you can pay your debts and manage new credit more efficiently.

Credit Scores & FICO Explained

Your credit score, or “FICO score,” is something you need to mentally master. It is a single output that significantly impacts your borrowing abilities and creditworthiness. All credit score factors matter to you – therefore, it is essential to have a solid understanding of how they work.

The Types of Credit Scores

While there are many types of credit-scoring algorithms, the majority are a type of FICO score. This is why the term “FICO” goes hand-in-hand with “credit score” so often. If you hear the term “FAKO score,” it just means anything but a FICO score.

Here are some different credit-scoring models that exist:

  • BEACON
  • CE
  • Empirica
  • FICO
  • VantageScore 3.0

At least nine of 10 lenders use a FICO score to screen applicants.

 

(Source wwww.myfico.com)

How Does FICO Calculate Your Credit Score?

  • Payment History = 35%
  • Amounts Owed = 30%
  • Length of Credit History = 15%
  • New Credit = 10%
  • Credit Mix = 10%

Of course, each type of credit rating will have a slightly different algorithm. But, you should hold these rating factors as the most important variables. Focus on avoiding delinquencies or worse, and start bringing your total debt down.

Hint: pay revolving debt first. Your installment debts (such as student loans) do not count toward your utilization ratio.

Which Credit or FICO Scores Do Lenders Use?

FICO offers 28 main score versions to each of the three major credit bureaus. It provides a scoring algorithm for these bureaus to determine a FICO score to assign to each file. With the help of FICO, every credit bureau also has an in-house scoring model. They are as follows: BEACON (Equifax), FICO Risk Score (Experian) and Empirica (TransUnion).

A lender will decide on which credit bureau to pull your file from. That bureau will dictate the score that is provided – based on the type of account you wish to open. This means your score could vary for a car loan, home mortgage and so on.

Auto Score vs. Bankcard Score vs. FICO Score

There is an appropriate time for a lender to use each type of score. FICO Score 8 is the most generally accepted model between borrowers and lenders. Older FICO score versions are regularly used and more common in the mortgage market. FICO Auto Score is the go-to score when qualifying an applicant for an auto loan, and Bankcard Score is used to measure the worthiness of credit card applicants.

FICO Scores Used by Auto Lenders

FICO Auto Score is most common, but the version each bureau uses will differ. Equifax typically supplies FICO Auto Score 5 or 8. Experian uses Auto Score 2 or 8. Meanwhile, TransUnion falls to Auto Score 4 and 8. Since the FICO Auto Score 9 recently came into being, it might start gaining traction with any or all of the credit bureaus soon.

FICO Scores Used by Credit Card Issuers

FICO Bankcard Score 2 and 8, and FICO Score 3, are all sometimes pulled for the purpose of making credit card lending decisions. FICO Bankcard Score 9 also now exists but is not yet commonplace. The Bankcard Score focuses more on your credit card history and less on your medical debts, utility bills and any one-off missed payments.

FICO Scores Used by Home Loan Providers

A mortgage broker or private lender will typically use a dated FICO Score. This is because the underwriting rules for the U.S. mortgage industry require the use of older versions. As such, Equifax uses FICO Score 2, Experian uses FICO Score 5, and TransUnion uses FICO Score 4 to qualify mortgage applicants.

Even after reading about scores here, you no doubt have some questions. A good way to gain more knowledge is by reading the informative content on myFICO.com’s website. This will give you a better idea on how the credit rankers run things, too.

Credit Report Mystery

Reading and Understanding Your Credit Report

Confusion forms when you first look at your credit report. It is hard to know what is there, what is not and how things got there in the first place. But, this foggy way of thinking clears up once you get a good grasp of basic credit report terms. Below are some things you might find in your file:

Default

After you fail to pay, it will say you are in default on your debt. This happens after you fail to repay as scheduled. With credit cards, a default is usually reported after you go 90 days without making any payments. The default status will stay on your credit report for six years before it drops off.

Derogatory

A derogatory mark means only that the item is a negative one. It usually implies a late payment, charge-off or court judgment against you. It serves as a warning from a scorned lender and symbolizes a lack of creditworthiness. The derogatory status can stay on your report for up to seven years.

Satisfied

A satisfied item is anything that went into dispute with a creditor but is now fully resolved. As with all public record documents, a court judgment will stay in your file for seven years from the date you satisfy the debt.

Settled

A settled item is a debt that was in arrears but no longer exists because a settlement agreement was made between you and the creditor. This is a payoff that allows you to settle for less than what you actually owe – it is common when dealing with debt collectors since they pay pennies on the dollar to own the debt and will typically negotiate. Not paying the total amount back can harm your score, and the damage will stay on your file for seven years.

If you are a responsible borrower, the positive terms you might see include “Pays As Agreed” or “Paid/Closed Never Late.” Additionally, when you start running late on your payments, you might see 60 Days Past Due or 120 Days Past Due on your report.

What Else Your Credit Report Tells You

Your credit report contains many other pieces of information aside from the current account status for each debt. Take a look below to better understand what all is on your credit report and how to read it.

Personal Information

Your credit report will provide personal information, including your full name, where you live, your place of employment and your Social Security number. This data is gathered from the various accounts you hold that are being reported to the credit bureaus. A credit report will get an update to its information any time an account is updated. It can mix up information at times if your accounts are not up-to-date, so keep that in mind.

Soft / Hard Inquiries

Any time a lender pulls your file, it will result in an inquiry. This inquiry can be either soft or hard, with the latter having a short-term negative impact on your score. Soft inquiries mostly occur when employers run a background check for employment purposes. Many lenders will also perform a soft pull of your credit report to see if you pre-qualify for one of their offers before sending it to you.

Hard inquiries occur when lenders determine your creditworthiness at your request. A hard pull can drop your score a few points but will drop off of your report two years after it posts.

Public Record and Collections

Your credit report will include any public records in your name, such as bankruptcies, court judgments, foreclosures, lawsuits, wage garnishments and tax liens. The length of time these entries stay on your reports is variable. A civil judgment will last for seven years. Meanwhile, tax liens are very dangerous – they drop off seven years after the paid date, but leaving them unpaid can plague your file for 15 long years.

Credit Errors

 

Tackling Your Credit Report – and the Errors!

You have a credit report on file at Equifax, Experian and TransUnion. Each bureau accepts information from credit reporting companies. The creditors submit details to one, two or all of the major bureaus. Thus, it is possible for your reports to contain inconsistent information.

Some lenders will pull from one credit bureau only. This means your chance to qualify for credit comes down to which bureau they choose. So, it is important to make sure your information is accurate. You also need to make sure that all your accounts show up on each of your reports.

Boost Your Score by Fixing Credit Report Errors

Did you know that the FTC’s 2015 follow-up study on credit report accuracy found that roughly 20 percent of subjects saw a credit score increase after fixing errors found on their reports? This news came after discovering that 20 percent of credit reports contain at least one inaccuracy.

These errors are often little details that get mixed up. This typically happens when lenders only report to one of the credit bureaus. The missing pieces of your payment history can make or break your credit score. Furthermore, having only part of your debt in each file will result in an inaccurate calculation of your credit utilization rate – for better or worse.

Credit Report Errors Worth Disputing

The hardest thing to decide is whether you should report an error or not. It is not wise to ignore anything that is incorrect, but many issues will not impact your score. Little discrepancies in your personal information, for example, will not lead to a points boost.

The best time to report an error is when you see a major issue. If something is literally holding your score down, then you should report it. Even as little as 25 points can influence how you are able to build your credit. Imagine a few unjust rejections as you apply for loans and credit cards – these further drop your score. Ultimately, you look like a less reliable borrower than you really are.

Here are the errors that can impact your FICO score the most:

  • Letting an account enter Collections status = up to 100 points
  • 30 days delinquent on a bank card debt = up to 100 points lost
  • Missing a single credit account = up to 100 points difference by file

Understand that if you have an error causing a 100-point difference, it is severely holding you back. Going from a 780 to 680 score alone can result in more than $450 annually spent on extra interest. Take advantage of the chance to improve your score whenever you can. However, make sure not to fabricate errors or exaggerate issues to get bad debts removed.

How to Find Errors on Your Credit Report

First, simultaneously obtain current copies of your credit reports from the big three credit agencies. Then, you can compare the data and determine where any inconsistencies lie. This will be effective for picking up on most or all errors, but further review may still be still necessary.

One thing to watch for is debt that gets sold and resold. The information can change with time, and even the amount owing might be different. Any discrepancies may be grounds for removal of the entry.

This can bring your score up, but, how much will it increase? Four in every 1,000 reports with errors will see a change of as many as 100 points. This is a staggering statistic, but you should look at the stats affecting the majority. Five percent of erroneous credit reports contain inaccuracies of 25 points or more.

It is free to dispute credit reporting errors. Do this if you find anything in your file to be unfair or unjustified. Your credit score will improve after the errors are removed. However, make sure to only report true inaccuracies; if the debt reappears, your score boost will reverse itself fast.

Step-by-Step Credit Report Error Guide

So, have you come to the decision that reporting your errors is the right thing to do? It can make a major difference and aid you in your journey to rebuild your FICO score. With that said, you will only get good results if you follow the proper protocols.

Here’s how you can go about reporting errors in your credit file:

Contact the Credit Bureau

Reach out to the credit bureau to report your claim with a dispute letter. Be respectful, and provide all evidence you have to back up the fact that an item should be removed. If the information is inaccurate with all three bureaus, make sure to report the problem to each.

Wait to Hear Back

The company that reported the debt will have a short period to dispute your claim. This is when any information against you can come into play. After that, the dispute can go into mediation for a final judgment. Typically, you will hear back from the creditor within 30 days.

Usually, the judgment will be completed within this short time frame. In difficult situations, though, it can run on for a few months or longer. Once all is over, your score will recalculate. However, it is important to note that the entries might drop off temporarily and return after evidence against you is found. So, if you report factually accurate entries, it could end up leaving you in a worse position later.

What if You’re the Victim of Identity Theft?

This is an entirely different situation, but the process for handling identity theft is somewhat similar to reporting other issues. You must contact the credit bureau(s) with your claim. However, to be better prepared, a copy of your FTC Affidavit should be supplied. You can also use this to obtain a police report at your local police station.

Supplying all this information, along with your proof, will be adequate. From there, you will wait for a reply and see if any further documents are needed. Identity theft entries can damage your score drastically, and they should be reported as soon as you notice them.

Furthermore, it is important to watch out for identity theft all the time. This issue hurts many Americans every year, and there are endless ways for fraudsters to target you. There are many free identity theft protection services that work wonders.

If you believe you are the victim of identity theft and have contacted the credit bureau, you will also receive a fraud alert on your credit report. This lets lenders know to be careful when dealing with someone who connects to your file.

Read the FTC’s Disputing Errors on Credit Reports to learn the entire process.

Credit-Related FAQs

You should have a clearer view now of how credit works, but here’s extra info (and reminders) to help you out!

1. Do Lenders Report to ALL Credit Bureaus?

A lender can post information to one or all of the major credit bureaus, which are Equifax, Experian and TransUnion. This data will calculate into your FICO score. Eventually, a lender will use your credit rating to determine your loan eligibility. Your reports can get mixed up and have varying scores, which can result in unjust denials of credit.

2. How Do Credit Bureaus Collect Personal Data?

Information like your current employer and physical address can come from your credit card issuer, your loan provider or your utility provider. These data points are put in your file on a somewhat regular basis – monthly, quarterly, etc. This gives the bureaus what they need to try and keep your personal information up-to-date.

3. How Do You Get a Copy of Your Credit Report?

Go to www.AnnualCreditReport.com to make a request online. This is a service that allows U.S. citizens to request a free credit report from Equifax, Experian and TransUnion. You can pull your reports once a year, and per the FACT Act, it is your legal entitlement. You may view the reports online or request that printed copies be mailed to you. However, keep in mind that this will only get you copies of your reports – and not the associated credit scores.

4. How Often Should You Check Your Credit Report?

You should always stay up-to-date with what posts to your credit report at each of the major credit bureaus. Spread things out, and check one of your files every four months. Alternatively, a free or affordable credit monitoring service can help you keep tabs on things.

5. Can You Find Out Which Score a Lender Will Use?

Thanks to the FCRA Act, a lender must include “the range of possible credit scores under the model used to generate the credit score.” This means you will know whichever credit ratings a prospective lender receives. Not only that, but you will also be told the type (version) of FICO score that was pulled for your application.

6. How Long Does Stuff Last on Your Credit Report?

  • Unpaid tax liens: Up to 15 years from the filing date
  • Bankruptcies: 10 years – possibly seven years if you get a Chapter 13 discharge
  • Tax liens: Seven years from the filing date
  • Collection accounts: Seven years + 180 days from the first month’s missed payment
  • Foreclosure: Seven years after the date of your foreclosure
  • Late payments: Seven years after the date of the payment delinquency
  • Charge-offs: Seven years after the date your debt is written off as a loss
  • Soft inquiries: Two years from the date of the inquiry
  • Hard inquiries: One year from the date of the inquiry

Sources:

https://blog.creditkarma.com/personal-finance/how-much-do-americans-really-know-about-credit/

http://www.myfico.com/crediteducation/credit-score.aspx

http://www.myfico.com/

https://www.ftc.gov/news-events/press-releases/2015/01/ftc-issues-follow-study-credit-report-accuracy

https://www.ftc.gov/news-events/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports

https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports

Student Loan or Credit Card Debt Which Is Worse?

By | Debt, Uncategorized

Credit cards and student loans are two major debt lines plaguing American households today. It’s said that the average American family carries $16,061 in credit card debt and a whopping $49,042 in student loan debt.

The latter statistic is worth looking into further.

Student Loan and Credit Card Debt

How Your Student Loan Impacts Your Credit

Your student loan is as real as any credit card or loan on your credit file. It’s not anymore “forgiving” than any other type of installment debt. This means every delinquency will hurt your credit score.

The worst case scenario comes from defaulting on your student loan debts. This is something you absolutely want to avoid. It can send even the strongest credit scores down 100s of points. The road to recovery will be long, and the damage will stay on your credit report for seven years.

You can usually negotiate with your student loan provider. If you’re in financial distress, try to work out a payment plan for the near future. Even avoiding a delinquency entry on your file can save you an 80-point drop after your first 30 days of being delinquent.

Your student loan reports both good and bad. However, it’s the bad that does the most to your credit rating, while good efforts have little reward. You need to avoid the penalties to your FICO score to have a chance to repair your credit effectively.

How Credit Cards Differ from Student Loans

Credit cards are a type of “revolving” debt, which means there’s an open credit line at all times. You will be able to borrow up to your max amount so long as the minimum monthly interest payments are paid.

It’s imperative to stay up to date on your credit card debts. Defaulting will cause extensive damage to your credit. You can typically pay a very small payment to keep your card alive. Meanwhile, the minimum payment for your student loan might be a bit more difficult to sustain.

Your credit score’s second-biggest factor is your utilization rate. This is the amount of debt you carry versus the amount you’re able to borrow. The higher it is the worse it says about you as a borrower. You want to keep it low (below 30 percent) for as long as possible; your payment history is another calculation variable and it considers your previous utilization levels.

Pay Credit Cards or Student Loan First?

It’s quite the dilemma. Paying your student loan helps with offing a major outstanding debt. However, paying off your student loan will not impact your credit utilization rate for the better in any way.

If you have a substantial amount of credit card debt, it makes sense to tackle that first. Each $1,000 you knock down will have a bigger impact on our credit rating, but keep in mind if your student loan runs into default it will be all for nothing.

Your payment history still remains the number-one factor in your FICO score calculation. Thus, it’s a good idea to see how you can improve it. This would mean maintaining payments on your student loan while reducing other debts.

You want to use any extra cash to tackle your overall credit card debt. The goal is to bring your utilization rates down as much as you can. This can be done from accepting credit limit increases too – so long as you avoid using the newly available funds.

Using Tax Refunds to Pay Off Student Loans

You will not want to make the mistake of using your tax refund as a way to pay off your student loan. Everyone thinks it is hard to take care of, so using your taxes is a sensible way to get the debt under control.

The truth is, your student loan will not hurt your score if the debt remains on your balance sheet. Trouble only arises when you run delinquent or if you default the loan. This means you can leave this particular installment loan for last while focusing on paying off higher-interest debts.

You are endangering your creditworthiness by putting your tax refund to use to pay off your student loan. The large lump sum can go toward your credit cards and have a much greater impact. Remember, credit cards accrue interest month after month as you fail to pay them off; it won’t take long for your debts to pile up if these are left unchecked.

Conclusion

At the end of the day, the worst type of debt to carry is the one you fail to pay off. It’s important to prove you are a good, trustworthy borrow in every sense of the term. Therefore, you must maintain positive status with your accounts (including your student loan) even if you only pay the minimum.

If you ever feel unable to pay your student loan payments, consider one of the three payment plans they offer. You can arrange to pay as you earn, based on your income or contingent on a certain amount of generated income.

If you fail to come to a deal then missing your payment will result in a late payment entry on your credit report. The damage will be irreversible; now that you know what’s at stake, make sure you sort your debt repayments accordingly.

Sources:

http://www.myfico.com/credit-education/whats-in-your-credit-score/

https://www.nerdwallet.com/blog/average-credit-card-debt-household/

blog.ed.gov/2015/06/3-options-to-consider-if-you-cant-afford-your-student-loan-payment/

Repair Credit: Results in Months Not Years

By | Credit Repair, Credit Reports

repair credit now

Full credit repair is no seven-year journey; with the right efforts, you could increase your FICO score by more than 100 points in just six to eight months.

If you’re trying to repair credit problems, don’t turn to bankruptcy. In fact, even if you’re unsure how to repair credit, the best route is debt management.

Take a look below for more details on what actions you should take, which include: using secured credit cards to repair credit, fixing credit report errors to remove penalties, shifting away from heavy revolving debts and taking credit limit increases when possible.

How to Improve My Credit Score

In less than a year, you can go from bad to great credit. It’s just going to take some work. That means building new credit, paying old debts and fixing any delinquent accounts. But if you have bad credit, how exactly will you do this?

The best thing you can do is forget everything you thought about secured credit cards. It’s never a good route if you have other options – but a secured card works wonders when you’re trying to repair credit.

How to Repair Credit with a Secured Card

It’s simple – get a secured credit card in your name and start using it. After 12 to 18 months of responsible paying, the card issuer will upgrade you. Some cards only increase in security funds and others switch to unsecured cards.

Aim for the latter and shoot for the highest credit limit you can get – the bigger the collateral you can provide, the better. The best convertible secured credit cards allow for a $5,000 to $10,000 secured credit limit.

The only other thing is to avoid using the secured card for all your monthly expenses. It’s not good to be that active – after all, the more debt you carry on the card, the worse your credit utilization rate will be. This is an important variable to keep under control; your outstanding debt levels amount for 30 percent of your FICO score calculation.

Building Credit by Fixing Errors

Another way to see a fast increase in points is by fixing errors on your credit file. If there’s an inaccurate entry, it could plague your score by 100 points or more. In fact, a FTC study from 2013 found that 1 in 250 consumers have a 100 point or higher deficit due to reporting errors. Beyond that, another 1 in 20 files contain errors amounting to lower scores by 25 points or more.

You can request a copy of your credit report from each bureau individually, or through the AnnualCreditReport.com website. Take a look at it for any signs of inaccurate or missing information. If anything is spotted, when the bureau acts on it your new FICO score will be higher.

You can report errors on your file through the credit bureau websites. TransUnion also lets you send your report by mail. It’s best to contact all three, but once you notify a single bureau they’re obligated to tell the others. If the issue is due to identity fraud, and not a recording error, then an FTC affidavit and police report might be required.

Consolidating Your Revolving Debts

Revolving debts weigh more on your credit score than installment debts. This means short-term loans can help. If your credit card debts are high, you could use a consolidation loan to lower your debt-to-credit ratio. The installment debt created by your loan won’t drag your score as much, so your score will go up once your file updates with the change.

This is why debt repair services are actually a hidden gem. You can avoid bankruptcy and pay back what you owe on your own schedule. In the end, you might be able to repair your credit score within six months to a year. It’s just a matter of organizing your debts and optimizing your file based on how FICO calculates your score.

Take Any Limit Increase You Can Get

When you are offered a higher credit limit it means you’re given the chance to take on even more debt. This shows that you’re trusted with a higher amount; until you spend it, your debt-to-credit ratio will be improved.

Therefore, taking on credit limit increases as they come is a fantastic idea. It’s just a matter of having the willpower to not blow all the new funds. Long story short, if you can manage this, then the greater credit limits will help boost your credit score.

Conclusion

Credit repair is a scary subject – where the only happy ending seems to come after you go through bankruptcy or if you win the lottery. This doesn’t have to be the case, and there are ways around bankruptcy, but it will take a real commitment.

The journey begins with figuring out what you’re doing wrong as a borrower. In most cases, it’s carrying too large of a debt on credit cards. Deleverage this by getting access to loans and by consolidating your high-interest debts.

Then work on sustaining the best credit utilization rate you can manage. Your FICO score will show real changes after only three to six months of good stats getting reported to the credit bureaus.

Sources:

https://www.ftc.gov/news-events/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports

http://www.myfico.com/crediteducation/amounts-owed.aspx

7 Myths About Credit Repair Companies

By | Credit Repair

Credit Repair Myths

If your credit score is not as high as you’d like it to be, thanks to some delinquent accounts on your report, credit repair may be your best bet. If you haven’t considered this route before, it’s probably because you’ve heard a few misconceptions about how credit repair companies work. Fortunately, many of the negative things you’ve likely heard about credit repair can be debunked. Check out the truth behind the most common credit repair myths.

Myth 1: Your Credit Score Will Increase Overnight

Credit repair will surely increase your credit score, but not right away. You’re not going to go from 500 to 750 in a month, either. Instead, plan to see incremental score improvements over the next several months. This means it might increase by 25 points one month and 50 the next, and so on. Going into the process with a realistic attitude when it comes to how long it will take to see improvement will ensure that you’re happy with the results. Just know that if you choose the right credit repair company, you will see a marked difference in your credit score this year.

Myth 2: You Can Get the Same Results on Your Own

It’s true that you can call or write to each of your creditors on your own to get inaccurate or negative information removed from your credit report. But the reality is that few people actually do this. And if you do happen to get around to contacting every creditor, you will need to have some patience and great negotiation skills to get the same results credit repair companies do. Otherwise, you’ll only end up fixing some of the problems. This is why hiring a credit repair company is the most effective option, since professionals know exactly how to spot and fix all your credit issues.

Myth 3: Credit Repair Will Decrease Your Score

Some people assume that the fact that they had credit repair will show up on their credit report, thus decreasing their score. While your score may go down at first, it’s not because of the credit repair itself. If this happens to you, it’s because once you remove a few items on your report, your credit has been rebalanced and you no longer have enough credit accounts to qualify for a good score. You can combat this issue by continuing to build up your credit after the repair, which will help you end up with a better score in the long run.

Myth 4: Credit Repair Costs a Lot of Money Up Front

When you’re already in debt, it doesn’t make sense to add to it with extra expenses, which is why it’s good that credit repair is often affordable for anyone who wants credit help. In many cases, you’ll pay a monthly fee that is likely less than most of your other bills. And in return, your score will eventually increase enough to get you the lower interest rates you deserve, so you’ll likely start seeing return on your investment within months. In this way, paying for credit repair is one of the wisest ways to spend your money.

Myth 5: You Can Increase Your Credit Score by Simply Paying Off Delinquent Accounts

It’s a good idea to pay your debts on time. But it’s a little late to start this once a negative item shows up on your credit report. At that point, it’s already affecting your score and you need to get it removed as soon as possible. If you don’t have a credit repair company request to remove it, it can continue to negatively affect your score for about seven years. So while you should get into the habit of paying your debts, it’s best to do this before they get sent to collections and show up on your report. After that point, you need to hire a credit repair expert to request that it be removed.

Myth 6: Certain Negative Items Can Never Be Removed From Your Report

Some people assume that bankruptcies, foreclosures and other types of delinquent accounts can never be removed from their credit report. But in reality, it’s possible to remove any negative item, assuming you hire the right credit repair company. Some accounts might take a little more time and effort to remove, and there are no guarantees regarding the results you’ll get. But most credit repair companies can tackle any type of negative item on your report, so don’t assume you can’t be helped if you have a foreclosure or bankruptcy.

Myth 7: Negative Items Removed by Credit Repair Services Will Come Back

If you’ve been putting off contacting a credit repair company because you’ve heard that the negative items on your report will show up again, you can rest assured that’s a myth. In most cases, once an item is removed from your report by a credit repair company, it’s gone for good. You might have heard this myth because sometimes the credit bureaus remove an item after being contacted by a credit repair company, and then they hear back from the creditor months later and find that the debt may be valid. At that point, they may add the negative item to your credit report again, at which time your credit repair company can once again request that it be removed.

Now that you know the truth about these credit repair misconceptions, it’s time to give this method a chance to increase your credit score. Credit repair won’t decrease your score, so the only way you can expect to go is up!

Sources:

https://www.credit.com/credit-repair/

http://www.moneychoice.org/best-credit-repair-services-fix-bad-credit/

https://www.nerdwallet.com/blog/finance/credit-repair/

https://wallethacks.com/best-credit-repair-companies/

Getting a Mortgage With Bad Credit

By | Mortgage

Mortgage with Bad Credit

Is it possible to get a mortgage with bad credit? The answer is yes, but attempting to do so can pose unnecessary financial hazards. A far more effective plan would be to improve your credit score first and then seek real estate.

Get an FHA Loan

When your credit report is less than stellar, you could try taking out a Federal Housing Administration (FHA) loan, which the government insures. The FHA, by the way, is a division of the U.S. Department of Housing and Urban Development. The requirements for such a loan are relatively lenient. If you’ve experienced a foreclosure or if you’ve filed for bankruptcy, you still might be eligible.

The down payment of an FHA loan amounts to just 3.5 percent of a new home’s total cost. Private lenders often ask for larger down payments, sometimes at rates of 20 percent or more.

FHA loans do have drawbacks, though. To secure one, you’ll need to take out an insurance policy, and its premiums can be more expensive than conventional loan insurance premiums. For an FHA loan, you’ll have to pay an upfront premium as well. A private lender probably wouldn’t require you to make such a payment.

Also, it’s possible that you could obtain an FHA loan only to realize later that you’re unable to make your payments. In the end, it’s better to get rejected for a loan than to get a loan you can’t repay.

Find a Cosigner

Another option is to locate someone who’d be willing to cosign your mortgage. If this person’s finances are sound, he or she should be able to help you procure a lower rate of interest and other favorable terms.

However, this course of action ought to be your last resort. If someone were to cosign your loan, that person would be assuming a major risk. If you failed to make a payment on time or if you were to default, your cosigner’s credit score would be damaged severely.

For that reason, don’t be surprised or offended if those who are close to you decline to cosign. Likewise, if people ever ask you to cosign for them, you should turn them down no matter how much you’d like to be of assistance.

Use Your Negotiating Skills

If you have bad credit, you might still be capable of persuading a lender to grant you a mortgage. Most likely, you’d have to demonstrate that you currently make a lot of money, have substantial savings and aren’t in debt. Furthermore, it may help if you can prove that you’ve paid your rent punctually for the past 12 months or longer.

All of these factors would indicate that you’re financially responsible, and they might convince lenders to overlook your credit score, especially if it dropped due to circumstances beyond your control or because of a one-time mistake that you vow never to repeat.

On the other hand, you might create a financing plan with the person who’s selling the house. That is, you could make a significant down payment and agree in writing to give him or her a certain amount each month. However, many sellers simply have no interest in such deals.

 



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Whipping That Credit Score Into Shape

Given the serious drawbacks to all of the home financing methods mentioned above, there is only one conclusion to draw here. Before you even start looking for a home to buy, you really should make sure that your credit report is impressive enough.

Different credit reporting agencies have somewhat different credit score ranges. But, roughly speaking, those scores extend from 300 to 850. If you want to take out a conventional home loan, you should have a score of at least 650, and 700 or higher is preferable. Don’t panic if yours is less than 650, however.

Rather, there are a variety of ways in which you could raise that number fairly quickly. For one, you could obtain copies of your credit reports, look for errors that aren’t in your favor and tell the agencies about them. In addition, pay off all of your credit card balances. Likewise, if you haven’t always been doing so, start consistently paying your credit card bills on time and in full.

Moreover, with each of your credit cards, don’t utilize more than 30 percent of your credit line during any given month. In fact, to keep your utilization rate down, you might request higher credit lines if you’re eligible for them.

Finally, an outstanding credit repair service can review your specific financial circumstances and find ingenious and highly efficient techniques for boosting your score.

In the end, the strongest reason to avoid taking out a mortgage with bad credit is that you’d most likely get stuck with an extremely high interest rate. Because of that rate, you’d spend thousands of dollars more over the life of your loan. By contrast, you could invest perhaps a couple hundred dollars in improving your credit score. Consequently, you’ll not only obtain a much more affordable mortgage, but you’ll have the ability to work out many other advantageous financial contracts in the future.

Sources:

https://www.bloomberg.com/news/articles/2016-05-10/how-to-raise-your-credit-score-fast

http://www.forbes.com/sites/trulia/2015/02/04/the-pros-and-cons-of-seller-financing/#4ba516f7e822

http://homeguides.sfgate.com/buy-house-down-payment-bad-credit-7377.html

http://money.usnews.com/money/personal-finance/articles/2015/01/30/how-to-get-a-home-loan-with-less-than-stellar-credit

http://www.nytimes.com/2013/12/08/realestate/the-downside-to-fha-loans.html

http://time.com/money/3086800/qualify-mortgage-bad-credit-low-credit-score/

https://www.yahoo.com/news/4-ways-buy-house-bad-152456987.html

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