Posts Tagged ‘Credit history’

Loan

Loan (Photo credit: Philip Taylor PT)

About the Author:  Chuck Walden (NMLS #148160) is a loan officer with GMAC Mortgage.  Email Chuck at chuck.walden@gmacm.com or call 678-725-8076. Website is www.ChuckWalden.com

It’s time to act.  If you have been patiently waiting for better rates and better home prices, 2013 could be your last chance.

1.  Move if you’re a buyer – Rates are still awesome and you may never hear the words “it’s a perfect time to buy a house” again.  Interest rates are expected to increase this year.  Higher rates mean more money out of your pocket and the amount of home you can afford will decrease.

2.  Be picky about your lender – Always ask your friends and family who they trust or have used in the past.  I guarantee that you will not only find out who to use, but you will definitely find out who not to.  Talk with the recommended lenders about service and turn times.  Buying a home can be the most stressful event in your life.  Closing on time should not be taken for granted.  GMAC Mortgage has a closing on time guarantee. Trust me.  Your agent and you will appreciate not having to worry.

3.  The fat lady hasn’t sung until the loan closes – At the risk of sounding strange….closing a loan is a battle.  It doesn’t matter if you have an 800 credit score, no debt, and a seven figure income.  You must work hard with your loan officer as a team.  If they need something, get it now.  Putting things off even one day slows down the process.  Three things I always tell me buyers.  First, do not accept any money from anyone until your loan closes.  What if we need an updated bank statement and there is a large deposit listed?  This is a problem and even more documentation is needed.  Second, do not apply for any credit until the loan closes.  Do not apply for any credit cards so you can get a discount of the new stove for the new house.  Your credit will be monitored and if an inquiry pops up, more documentation is needed.  Third, do not quit your job.  Now, I know this sounds crazy, but I have seen it happen on the day of closing.  You have to have a job with income.

4.  Check your credit annually – www.annualcreditreport.com is a great website to track your credit.  If you are planning on buying a home later this year, pull your three free reports and make sure that every item listed is in fact yours.  If not, take the steps to correct it.  Take a look at your credit card balances.  Generally speaking, you never want to go over 30% of the credit limit.  People tell me all of the time that they pay it off in full every month.  Great, but that will not matter if I check your credit and you have a $750 balance on a $1000 limit card.  Keep that balance at or below $300.  Do you have a MasterCard, Visa, AMEX, Kohl’s, Target, Sears, and Discover cards?  That’s too many.  Available credit is also a factor in determining credit scores.  If you’re interested, call or email me to discuss how to tackle this problem.

5.  Get preapproved – A good real estate agent will never show you a house without you getting preapproved first.  Some still do, but I think you would agree that it’s a waste of time and money to drive you around only to find out later that you don’t qualify.  Find out how much house you can afford and then proceed from there.  Lenders (good lenders) will give you exact figures on payment and a price range you should concentrate on.  It is imperative that you are armed with this knowledge before you Google the first area to start looking.

2013 I going to be a great year, but change is ahead of us.  Please let me know if I can help in any way.

I have had three calls in the last twenty-four hours regarding possible credit fraud.  One of these was my mom, but that’s a different story.

Apparently, the three consumers have all received a letter indicating that their “secure” information had been compromised and it was possible that their personal information had been obtained.  Wow, that sounds scary.  What if someone used your personal information to open new credit cards, obtain a driver’s license, or even purchase a home?  If you ever receive a letter indicating that your information may have been obtained by an outside source, you need to take action.  You need to take action immediately.

Clark Howard, who is a nationally recognized credit guru, has an awesome guide concerning the steps needed to freeze your credit.  That guide can be found at http://www.clarkhoward.com/news/clark-howard/personal-finance-credit/credit-freeze-and-thaw-guide/nFbL/ .  Please take your credit history seriously. The criminals do.

 
 
 
 
 
List of high scores

Image via Wikipedia

If you’re troubled about your credit scores, there are ways to get back on track and increase your scores in a short time.  Of course, this is going to take some work and effort on your part, but it will definitely be worth it.  Here’s why. Lenders base their interest rates on many factors. One of those is credit score.  If your score falls in the 640 – 660 range, your interest rate may be higher than someone who has a score of 661 – 700.  This small difference in score could cost you tens of thousand of dollars over the life of your loan.  Persistance on your part can and will help you now and in the long run.  Listed below are some tips regarding increasing your credit score and the steps to take.

 

Also, let me say that you “build” your credit, you don’t lose your credit.  For instance, your credit score does not start at 850 and then if you make a mistake it begins to tumble.  Your credit starts at the bottom and as you acquire different sources of credit and make those payment s on time, your score increases and you are establishing your credit profile.

 

First, if you have a Visa, MasterCard, AMEX, Belk’s, Kohl’s, BP, Exxon, JC Penny, and a Discover card, you are headed in the wrong direction.  The magic number of cards to have is three.  Also, taken into account is the age of the cards.  The longer those cards have been open, the more attractive your credit looks.  Most credit cards have a credit limit assigned to them.  It is a smart idea to get those balances down to 25% or lower of the credit limit. For example, if you have a credit card with a $1000 limit, you need to keep that balance at $250 or less.  If you have a couple of cards that you never use, then use them and keep them active. Even if you just buy a pack of gum every few months, this will show the credit bureaus that you have access to credit, you are using that credit, and you are paying it on time monthly.

Second, if you have Collection accounts on your credit report, this will negatively affect your scores.  Now, collections can be complicated.  The reason is that the scoring software that credit bureaus use may go off of the date of last activity.What this means is that if you pay off a collection, the company reports the collection as paid, it can actually make your score drop.  When you speak to the collection agency, make it a condition of you paying off your collection account that they stop reporting to the credit bureaus. As always, get this in writing.

Third, if you have any past due accounts, catch them up immediately.  Once caught up, don’t be late again. 

Fourth, you are entitled to a free credit report every year.  Put that on your calendar!  Go to www.annualcreditreport.com and request your report (for free) from each bureau.  If there are any trade lines on your report that are not yours, you need to dispute them and get them removed from your report.  Also, look to make sure that your open credit lines (credit cards, etc) are reporting a credit limit.  For example, if you have a MasterCard with a $1000 balance and the credit limit is not showing on the report, you are considered maxed out and at 100% of your credit line. If your credit limit is actually $5000 and that is showing on the report, you are only at 20%.  Big difference in score.

 

Take charge of your credit.  It will take some work and probably some patience, but it could keep a lot of money in your pocket.  Also, it is always a good idea to start this process well in advance of a home purchase.  If you need some guidance, don’t hesitate to let me know.