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The May Monthly meeting was jam packed. Literally with information. Suzanne Murray from Peoples gave an outstanding presentation. She handed out tons of information and gave practical easy to use information to everyone for what a credit score is and how to read a credit report. Plus tips to follow. You understand exactly what your payment history involves and that it is very important to have a solid track record of making all your payments. That is why you need to make changes now, so that over the next 12-24 months you will see your payment history improve and subsequently see your credit scores improve as well. You want your scores to reflect a positive payment history; that you make your payments and you make them on time. This is key when a lender is looking at your application for a mortgage they want to see that you are a solid candidate and you are responsible and will make your payments as you promised. On time. Every time. This is why I require all our tenant home buyers to enroll in automatic payments. This helps you get qualified for your mortgage because your monthly payments will be reported to the credit bureau. Did you know that rent is not recorded on FICO scores traditionally? Usually only when there is nonpayment and the management company has sent you to a collections company will rent every be reported, that can make it tough for those of you that pay rent on time and do not get the benefit . Do not assume you are getting credit for all your on time payments. Therefore you should keep records of your payments so that you can bring that into a lender- that means keep track of check numbers so you can order the cashed check from your bank as proof to a lender when you are ready to get financing. Now onto the new information about FICO scores from our June Class. What I s a credit reporting agency? A company that collects and sells information in the form of written reports to many kinds of creditors. Equifax Experian, Transunion. Consumer Credit Report- a single bureau report that lists promotional and account management inquiries that is available only to consumers. Residential mortgage credit report- a tri merged report that is fully investigated and used to determine credit worthiness for the purpose of obtaining a mortgage loan. This is what loan officers look at when they pull credit for mortgage loans. The report is from all 3 credit bureaus. Inquiry- this is when a credit report has been requested and viewed. This can be for a credit card, a home loan, a car loan or even credit card offers. Remember any time someone requests your social security number and or drivers license they are pulling your credit and that would be an inquiry. 2 types of inquires: "hard inquiry" when you have applied for some form of credit prompting the creditor to check your report - that can cost up to 5 points off your credit score. "soft inquires" are when you are offered a credit card or line of credit companies buy information from the credit bureaus and they send out offers to folks who meet certain lending criteria. You can be removed from these lists by going to www.Coloradonocall.com or www.donotcall.gov Joint account- an account that 2 people use and each person is liable for the payment. Keep this in mind if ever divorced, if both are on the account and you no longer want to be on the account it needs to be paid and closed completely. On the other end if married having joint accounts helps improve both of your credit scores as long as you have a positive report. Revolving Account- A credit agreement where you have an option of paying the outstanding balance in full or making a minimum payment based on the amount the outstanding debt is each month (like a Visa account). What is a credit score- a number that summarizes your credit risk. It is based on a snapshot of your credit report at a particular moment in time. When you apply for credit-whether it be a credit card, furniture to be financed, a home mortgage the lender wants to know your credit risk level. If they give you a loan or credit availability they want to know how likely you are to pay them back on time Does my FICO score Alone determine whether I get credit- NO. Most lenders use multiple factors and FICO score is one of those factors. The lender often looks at the amount of debt you can reasonably handle given you income, employment, history and credit history. When you apply for a home loan there is an underwriter that reviews all the factors and determines whether you meet that lenders specific criteria.
FICO can help you in the following ways: You can get a FICO score instantly. It lets you know where you stand right now and when reviewed with someone that understands FICO scores can tell you whether it is a good idea to avoid further debt at this time or should you wait. The other advantage is that it can tell you what things you need to improve upon and what things you should continue doing because you are doing them correctly. Credit Decisions are considered fairer because with FICO scores the lenders focus on the facts rather than personal opinions or bias. FICO does NOT include: race, religion, gender, nationality or marital status. It only looks back and takes a picture of finances in a snapshot view. Older credit problems count for less. Your Fico scores will improve over time if you have had a negative history and make improvements consistently you will see your scores go up. If you had poor credit performance in the past FICO will adjust its scoring if you improve your performance. Therefore you can overcome past mistakes. FICO also looks at your most recent activity first. Therefore you are rewarded for more recent positive payment history OR punished for more recent negative payment history. When working on improving your FICO scores a huge benefit will be improving your payment history over at least a 12 month period, and that is the past 12 months prior to pulling your report. You need to make ALL payments on time for at least 12 months and you will see our scores improve because the good is recent and outweighs poor prior performance and 12 continuous months show a new trend not luck! Credit Reports- lists the types of credit you have, use and the length of time your accounts have been open and whether you have paid your bills on time. It tells lenders how much credit you've used and whether you are seeking new sources of credit. This is why you NEVER want to apply for new credit cards, cars, furniture when you are trying to get a home mortgage. Do not make any new purchases at all before you have signed the paperwork at the title company and have the deed in your name. An approval letter is not the same. Wait until the home is yours before you do anything that jeopardizes your loan. How quickly does my FICO score change? Being that it is a snapshot, it changes whenever your credit report or activity changes. A BK or foreclosure or late payment will lower your score pretty quickly- it shows a change for the negative and it is recent so it will change within weeks. Improving your score will take longer being that FICO wants to see a trend, multiple and consistent positive performance and then it will start to trend upwards- so improvement takes month. How often should you check your FICO scores? It is a good idea to check your score every 6-12 months before you are applying for a big loan. This will allow you to make any changes if you need to improve your score to get a better interest rate. What will you see on Your Credit Report: personal information such as your name, address, SSN, Date of birth, employment information. This information is for identifying purposes. Accounts- your credit accounts, but only those that report to the credit bureaus. This will include major credit cards, auto loans, and home loans. -the date the account was opened -your credit amount limit or total loan amount -The account balance- how much you currently owe -your payment history- do you pay on time, or late and how many times have you paid late. Inquiries- have you applied for any loans or authorized a lender to get a copy of your credit report. Inquires show the list of lenders that have accessed your credit report within the last 2 years. The more recent inquires affect your credit negatively. -Voluntary Inquires- if you requested credit and that caused the inquiry. Like applying for a loan -Involuntary- when your credit was pulled to offer you credit. Like when you get the preapproval offers for credit cards. Negative Items- Lenders always report delinquency information when you have missed a payment. Even those companies that do not report positive payment history will often report negative history. Credit reporting agencies will also collect information on overdue debt from collection agencies and public record information from state and county courts. Public record information will include : bankruptcy, foreclosure, tax liens, garnishments, legal suit and judgements. The more recent the negative items the greater your scores will decrease. Does everyone have a FICO Score? No. To actually calculate a FICO score there has to be enough information available and recent enough. That means you have to have at least one account that has been opened for 6 months or longer and at least one account that has been reported to the credit reporting agency in the past 6 months. You know how important FICO scores are to your financial stability. Don't get frustrated by all the information that you will receive in these letters and the upcoming classes. We work together and with you once you move into one of homes and once you start following our easy to understand instructions and attend our monthly meetings it will all come together and you will see improvements over the next 12-24 months while living in your home.
This Class was taught by:
Suzanne Murray
Class Offered to Tenant
Buyers By:
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