Tag Archives: credit scores

Real Estate

Good Rental History Can Help Borrowers


First-time home buyers planning to purchase a house later this year may have a better chance of qualifying for a mortgage if they have had a history of paying their rent on time.

  • Last year, credit-reporting agency Experian added a section to millions of credit reports showing on-time rent payments and raised the credit scores of many people.  The company said that this year it would add in negative marks, including mentions of bounced checks or of tenants’ leaving before a lease was up.
  • Incorporating rental payments into credit scores could affect millions of people who have not established credit histories through credit cards, student loan repayments, and other credit sources.
  • Almost half of consumers considered “high-risk” experienced an increase of 100 points or more after their positive rental history was added, according to Experian’s rent bureau.  Those with average or higher scores did not experience major movement.
  • Although it is still too early to show the effects of the new credit report, which began in December, the changes are intended to allow lenders and consumers to have greater transparency, according to Corelogic.
  • People who have lost their homes to foreclosure and are now leasing may be able to rebuild their credit histories by being responsible renters.
  • However, consumer groups and advocates are skeptical, noting that reports are sometimes riddled with mistakes and some landlord-tenant disputes may be difficult to capture in a credit report.  Rent may not have been paid, for example, because the furnace was left unrepaired for months.

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For all your real estate needs:
Call or email
John J. O’Dell Realtor® GRI
Real Estate Broker
(530) 263-1091
Email jodell@nevadacounty.com

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Real Estate

Mortgage Rates Are Great, If You Can Qualify!

Interest rates are near historic lows and home prices are affordable; however, many borrowers are finding they must have nearly pristine credit records and hefty down payments to get the best rates.

  • Since 2009, credit standards have become much tighter.  For borrowers, this emphasizes the importance of paying close attention to credit scores.
  • New rules unveiled last week, the result of last year’s Dodd-Frank financial-services legislation, require banks and other lenders to disclose to consumers the scores used to determine interest rates charged borrowers, or to deny credit, making it easier for borrowers to see how their credit scores affect the interest rates they pay.
  • The FICO credit scores on loans that banks are giving out and that are backed by government agencies Fannie Mae and Freddie Mac show the new reality.  Currently, the two agencies essentially finance 75 percent of all mortgages by purchasing the loans from banks, thus shaping how much it costs to borrow.
  • FICO scores range from 300 to 850.  Prior to the decline in home prices, a score of 700 to 725 was considered solid and, a borrower could expect to be approved for a “conventional” mortgage at the lowest rates.
  • From 2003 to 2006, 82 percent of Fannie Mae mortgages were for borrowers with a score between 700 and 750, but so far in 2011, only 13 percent of Fannie Mae mortgages carry that score, and just 1.7 percent have a score of 700 to 725.  This year, 75 percent of Fannie Mae mortgages are for FICO scores of 750 to 755, up from less than 5 percent before 2005.
  • These trends demonstrate the importance of understanding credit scores and ensuring credit reports are accurate.  Consumers can check their credit report at AnnualCreditReport.com.

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Thinking of buying or selling? Call or email:
John J. O’Dell Realtor® GRI
O’Dell Realty
(530) 263-1091
jodell@nevadacounty.com

Real Estate

Beware the Credit Repair Scam

Recession-hammered homeowners’ credit scores are on the decline across the country, say scoring industry experts, and that makes more consumers vulnerable to scams that purport to erase delinquencies, judgments, foreclosures and other problems from files at the three national credit bureaus — Equifax, Experian and TransUnion.

What sort of scams? A Federal Trade Commission settlement in early September with a Florida “credit repair” company provides a fresh example. The FTC’s complaint against Clean Credit Report Services Inc. of North Miami alleged that the firm promised clients it could boost their credit scores dramatically and quickly — even if the derogatory information in their files was accurate and current.

In national radio advertisements, plus Internet and TV pitches, Clean Credit said it could make records of “late payments, collection accounts, charge-offs, repossessions and bankruptcies” simply disappear from credit files, according to the FTC’s complaint.

Lower scores, in turn, are preventing many homeowners from qualifying for new or refinanced mortgages under toughened underwriting standards imposed by lenders and investors such as Fannie Mae and Freddie Mac.

The takeaway here for anyone with depressed credit scores who nonetheless is seeking a mortgage: Don’t believe claims of credit-repair operators who say they can perform miracles on your credit files, boosting your scores overnight and keeping them that way permanently. They can’t. If the delinquencies and other derogatory information in your files are accurate and current, the only way to boost your scores is to reverse your previous credit behavior and make responsible use of your credit accounts over time.

Finally, never pay money upfront. Not only are demands for advance fees for credit-repair red flags for scam operations, they’re also blatant violations of federal law.

Read the full story at: Washington Post

Business, Real Estate

Thinking About Buying a Home? How’s Your Credit Rating Affecting Your Chances?

house-with-key 

The lender wants to make sure that when they loan money to a you, that they are lending the money to someone who will pay them back. So when you apply for a loan, the number one thing they look at is your credit score. I know, that’s a twist from the roaring 2005-2007 years. I remember selling real estate in Grass Valley, Nevada City where the main criteria of the banks to loan money was that the buyer was breathing. 

Anyhow, a lender considers several factors about a buyer’s credit-usage behaviors. The system they use is a called “Tri-Merged Residential Credit Report” and is quantified as a scoring system called F.I.C.O. (Fair Issac Company). There are three companies who prepare credit reports and each one seems to come up with their own F.I.C.O. score. Different lenders use different methods, but most wind up using the middle score of the three credit reports. Others merge the reports as mentioned above.

Listed below is how the F.I.C.O. scores are generally interpreted:

• Scores range from 300 to 850.

• Score under 600 – will most likely need to use loan programs that are not F.I.C.O. driven. Represents extreme concern for underwriting and may result in additional fees, higher rates and/or points, additional down payment required, or even non-approval.

• Score 600 – 620: The underwriter will need to carefully review the application and may result in more fees, points and/or lower loan-to-value ratio.

• Score 620 – 660: This is considered a cautious risk although the buyer does stand a good chance of getting the loan provided he/she can explain any derogatory notations (i.e. late payments) in a plausible manner.

• Score 660 – 680: This is a standard automated approval score.

• Score 680 – 699: This is considered a very good risk by the lender.

• Score 700 – 719: This is considered an excellent risk by a lender and is pretty much a “slam dunk” for approval.

• Score 720 & above: This is considered “Accept Plus” for automated underwriting.

To determine the borrower’s credit score, most lenders apportion weights as indicated to the following factors:

• Timely payments – 35%
• Total debt – 30%
• Length of credit history – 15%
• New credit inquiries – 10%
• Amount/type of credit – 10%

A buyer/borrower can get a free copy of their credit report from each repository by mail or online at various websites offering “free credit reports” . I do not endorse any of them.  You should review your credit report once a year, as they often have inaccuracies and old derogatory notations that should be removed from the report.

However, you will find that most sites offering “free credit reports” do not give you your F.I.C.O. score and try to trap you into paying for an ongoing credit monitoring program or you have to pay to get your score, the report is free, the score is not.

According to CNN:

“Thanks to the Fair and Accurate Credit Transactions Act, or FACT Act, enacted by Congress in 2003, consumers can get one free credit report a year from the three major agencies – Equifax, Experian and TransUnion. But that doesn’t include scores, which come at an added cost of around $6 to $16. That’s the “fair and reasonable” fee credit rating agencies can charge consumers under the legislation.”

Here are some methods that you may use to improve your credit score:

• Dispute incorrect information by directly contacting the credit reporting agency.

• If you have any past-due debt, you can contact the creditor directly and settle the debt. Creditors are often willing to settle past-due debt for less than what is owed and sometimes are even willing to remove the derogatory notation about the debt. If the debt has been sold to a collection agency, the borrower would have to contact the agency.

• Pay down credit card balances, if possible, to less than 1/3 of the available limit.

• Work to show that you have maintained 12 consecutive months of timely payments on ALL of your financial obligations. If you have gone into foreclosure and/or bankruptcy, this will take longer; perhaps three to five years.