Real Estate Really

Fickle FICO Continued!

With Thanksgiving upon us, couldn’t help but pass along this holiday anecdote:

 

A lady was picking through the frozen turkeys at the supermarket, but couldn't find one big enough for her family. She asked a stock boy, "Do these turkeys get any bigger?"
The stock boy replied, "No ma'am, they're dead."

 *******************************************************

As promised, here are some other special factors which can weigh on your FICO score:

·     Current income

·     Employment

·     Any money owed because of a court judgment or tax lien

·     Having one or more consumer finance credit accounts

·     The number of recent credit checks (credit inquiries that were made yourself to check your credit, by your employer for employee verification or by companies initiating prescreened offers of credit or insurance do not have any impact on your credit score)

It's amazing what changes the credit score.  I've been watching mine on a monthly basis and when I make even a meager $30 charge for something, I'll get an alert that one of credit card balances has increased significantly!!  

 

It is extremely important that everyone out there take responsibility to monitor their reports and scores.  Credit scores can be adversely affected if the information in a credit report is not updated by a lender. Lenders and others that furnish credit information to a credit bureau usually update it every month. If they don’t report to the bureau that debt has been reduced or paid off, it will stay on the credit report until you find the error and report the updated status yourself!

 

Contact me for any of your real estate needs and have a HAPPY THANKSGIVING ! dgreco@kw.com

 

The Fickle FICO

Okay, blog readers of the world, here’s the first of several lessons on the infamous Credit Score, in language you can understand.

 

What is FICO?  Literally, it stands for Fair Isaac Corporation – named after Mr. Fair and Mr. Isaac, who developed a ‘score’ or measure of credit risk and sold it to the banking industry.  These guys are probably so rich they don’t need to be concerned about their own FICO scores … but you do.

 

A FICO score is between 300 and 850, with the median score of 723.  The FICO score provides banks with a snapshot of how likely you are to pay your debts.  As you have discovered if you have applied for any credit, banks may deny the loan, charge you a higher interest rate, demand more collateral, and/or require extensive income and asset verification if your score is low.

 

The score itself is a statistical analysis of your credit report information, typically from the three major credit bureaus – Equifax, TransUnion, and Experian.  Here are the components of your FICO score: 

 

35% — Payment History.  Pay your bills on time!  I have a friend who never received a $24 bill from a department store, because she moved and didn’t notify her creditors.  That $24 past due bill ballooned into a $285 collection from a collection agency, and she has been denied a mortgage loan because of it!

 

30% — Credit Utilization.  The ratio of credit card debt to your credit limits.  Pay off your debt but don’t close your credit cards.  If you have an abundance of credit cards though, it is best to close the ones you never use and get it down to a reasonable level of just a few credit cards with larger credit limits.

 

15% — Length of Credit History – As your credit history ages, and pay your bills on time, it can have a positive impact on your FICO score.

 

10% — Types of Credit Used – Installment (car loan for instance, revolving (credit cards), and consumer finance (financing from a furniture store for example).  You will benefit by having a history of managing different types of credit.

 

10% -- Recent search for credit and/or amount of credit obtained recently.  Don't go crazy opening new credit cards or applying for financing for that new carpet or couch!  Don't fall for the "You can get 10% off your purchase today if you apply for a credit card".  Multiple credit inquiries in a short period of time will hurt your score!

 

The FICO company sells FICO scores directly to consumers at www.myFICO.com.  Check it out!  There are other factors that lenders consider when granting credit -- more on that later!  If you would like more information on applying for credit for your new home, contact me at dgreco@kw.com!

Get your (Financial) House in Order!

Before you go looking for mortgage financing, it goes without saying that you should review your credit report.

 

Now, there are three credit bureaus that mortgage lenders use – Equifax, TransUnion, and Experian.  Despite all the commercials you see on TV to pay for it, you are entitled to a free copy of your credit report every 12 months.  -- OMG, will freexxxxxx.com please get rid of that obnoxious jingle! Really, who writes that stuff?!

 

Now, if you’re married, it can be assumed that the majority of your credit cards and loans are held jointly.  The majority of the credit shown on your report will also be reflected on that of your spouses.  So, here’s a little trick of the trade to ensure you always have a good picture of your credit report – without having to pay for it!   

 

Register for your credit report at www.annualcreditreport.com.  For starters, choose just one credit reporting company for your report (I would suggest Equifax, since the majority of mortgage lenders in our area use this bureau). 

 

Here’s a schedule:

Jan – He – Equifax

March – She – TransUnion

May – He - Experian

July – She – Equifax

September – He Transunion

November – She Experian

 

Now, you’ll have a full picture and a pulse on your credit report all year long.  Review the information to make sure all information is correct.  You are able to correct and or dispute information directly with the credit bureaus.  If you have past credit problems, don't lose hope.  Get on track now so that your ability to pay bills on time will be evident on your report when you apply for a mortgage.  Be prepared to present a rationale for any adverse information.  SLIPUPS HAPPEN!  But will a little perseverance on your part, you can raise your credit score and qualify for a mortgage, even with today's stricter credit criteria.  Contact me at dgreco@kw.com for more information on how to make your American dream a reality!