It’s sometimes surreal to think that in the institutional Lending industry that most people are reduced to the 3 digit number known as the FICO score. As cold as it might seem at times it is “objectively” the most fair and quickest way to determine the acceptable risk level of a borrower.

I’m an “insider” that looks at credit reports all day. I’m here to tell you what is wise credit use, what’s B.S., how accurate a FICO score is and the best ways to optimize your credit so you may get financed for the Home of your dreams

FICO score and credit reports play a big part in the home loan application process, but this does not mean that potential homebuyers with a less-than-stellar credit history cannot get a mortgage loan. Many mortgage lenders work with bad credit mortgage applicants. These bad credit applicants could oftentimes receive higher mortgage interest rates.

Mortgage lenders use credit reports to determine the amount of the mortgage loan and mortgage rate, as well as other mortgage conditions and terms that they will offer the homebuyer. Usually, the better the credit, the better the terms mortgage lenders would be able to offer. Mortgage refinancing options are also dependent on the homebuyer’s credit reports. There are three major credit reporting agencies: Experian, Equifax, and Trans Union. Homebuyers may obtain one free credit report from each of these agencies every 12 months. Mortgage lenders typically look at a merged report from all three agencies.

The credit reports list the homebuyer’s history of accounts including credit card, student loans, and real estate loans. They also list auto financing plans, child support, charge offs, and other financial accounts. The reports supply information on each account, such as when the account was opened, what the current balance is, what the highest balance was, and when each past-due payment was made. If the account was closed, the reports will give the date it was closed and supply a reason if necessary.

The reports also contain public records such as bankruptcy and foreclosure. Bankruptcy information stays on the records for 10 years. Account information stays on the records for seven years after the account is paid off. The information in these reports is not completely current or it is one to three months behind the date the reports are created.

Based on this information, the potential homebuyer is assigned a credit score ranging from 300 to 850. This credit score is often known as a FICO score, named after the Fair Isaac Company that came up with this method. A lot of factors can affect the score. Late payments on the accounts and unpaid debts lead to a record of bad credit and lower the credit score.

A credit score of 720 or above is likely to yield the best interest rates. Typically, the minimum score for mortgage lenders to approve a 30-year fixed-rate mortgage with a reasonable interest rate is 620. Potential homebuyers with bad credit will probably have scores lower than this. These homebuyers can try to repair their credit and increase their credit score.

To repair credit, experts recommend that homebuyers submit all payments on time and pay off all overdue debt. Of course this is common sense. Some of the not so common sense approaches are the following.

1. Keep all revolving debt (credit cards) below 50% (or below 33% is even better) of the Total credit limit; spread it out across different accounts if you must.

2. Never Close out accounts after they are paid off just don’t use them (this has to do with utilization ratios of available credit) If you must close accounts always close the newest accounts first and leave the older well established accounts open

3. Stay away from lending sources that are considered “Finance” companies. It seems that these types of loan sources can actually hurt credit scores in some instances.

4. Dispute inaccurate info on all 3 of your credit reports as well as with the actual creditorsPreferably send a dispute to the creditor first, wait a week and send a dispute for the same account to the Credit reporting agency reporting the inaccurate info.

5. Do not constantly take actions that have your credit pulled like applying for too much credit. Too many credit inquires severely impact your FICO score

If you are going to play the loan and credit game and plug yourself into the system of “institutional lending” you have to play by the rules of the game that are established by the lending and credit institutions. As ugly as that may seem sometimes this is the world we live in. The good news is there are ways for anyone with any credit rating or FICO score to get financed for what ever they want. Albeit sometimes it requires some credit repair and fico score recovery.

The process to recovery is a long one, but it is worth going through in order for homebuyers to obtain a good home mortgage loan. For homeowners who cannot wait out the long process of credit repair, getting a mortgage loan from a lender that deals with bad credit mortgages could be a good option.I just happen to know Many sources that cater to just that needFeel free to contact me with your questions and concerns I am here to serve YOU

Copyright 2006 Keith John Gill

Keith Gill is an Experienced Lending and credit specialist serving his customers with the highest amount of Customer Service http://www.MyFicoCreditRepair.com

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Unfortunately, very few people have “perfect credit” but having made some mistakes in the past does not mean there is not a product for you. No credit is just that. This means that the person has no information pertaining to their payment history. The good thing is that there are other things that can be taken into consideration to show you have the ability and willingness to pay your debts. One positive thing is a history of rent payments. Another thing to show is a cell phone or land line telephone bill. Utility bills are another way to show a history of paying bills. Simply having no file does not bar a person from obtaining home financing. There is no such thing as having no credit history. There is always something available to show a history of payment.

Slow credit is another possibility and is defined by someone who does pay there bills but has some delinquency payments, just paying a little slower than when they are due. Late payments affect your credit based on the severity. Reporting agencies base there scoring on multiples of thirty days. If the due date on ones credit card is January 15th, and the payment is made by February 14th, there may be a late fee from the card company but it will not show as a mark against the credit file. If that payment comes in after February 14th it will be considered a 30 day late payments and will show as a negative mark against the score. This type of slow payment puts a red flag up for a lender. There would be an additional mark if that payment came in after 60 days, again after 90 and again after 120 days late. Once an account reaches 120 days late the card company will generally forward that account to collections. It is very important to realize that delinquencies on different types of accounts are considered more severe than others. A late payment on ones mortgage is considered much more severe than one on a card. Installment loans fall in between revolving debt and mortgage debt. Slow credit is simply a person that has made some late payments but has been able to get those accounts current and has had relatively few delinquencies. In addition slow payment is different than a bad payment history.

Bad credit is a track record of payments that contains severely delinquent accounts and information such as Bankruptcy; chapter 13, chapter 11 or chapter 7. This type of file could also contain items such as foreclosure, charged off accounts, tax liens, judgments, and a history of seriously delinquent account. This type of profile can be caused by some sort of life changing event. In the case where these circumstances were caused by some unavoidable circumstances, a lender may be willing to extend a mortgage despite the history. For those with a bad payment history, a great place to start to correct the report is Lexington Law, one of the best legal credit repair companies in the country. There are hundreds of credit repair companies out there. Be careful when using their services as some of these services do not use legal avenues.

Scores range on average between 450 and 850. Each of the three bureaus: Trans union, Experian, and Equifax, have a different scoring system and different high and low scores. Not all creditors report to all three bureaus. A score over 700 is generally considered perfect. A score between 620 and 699 is marginal and a score below is considered what is called sub-prime.

The good news is that there are products available for files in any range. There are even foreclosure saver plans available for those who are facing the loss of their home. Everyone makes mistakes and everyone has been in a situation where that person felt things could not get any worse. One has to realize that there are solutions for you no matter what your score. The good thing is that some lenders look at more than just the score. They look at job stability, extenuating circumstances, and the willingness to pay.

Copyright 2006 Jason P Bertrand

Jason Bertrand is the President of JPB Financial Services, Inc., a Connecticut Corporation and member of the Better Business Bureau. He has over a decade of experience in the financial services industry and is a Notary Public in the State of Connecticut. Please visit the following sites:
http://www.emortgageloanstore.com http://www.businessloansandleasing.com
http://www.jpbfin.com
Feel free to contact Mr. Bertrand with any questions or concerns through jbertrand@emortgageloanstore.com, or mail to: JPB Financial Services, Inc Attn: Jason P Bertrand PO Box 552 Vernon, CT 06066 860-982-5334

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