FloridaFinanceCenter.com Mortgage Professionals
Buyers with Credit Issues and Low Credit Scores
Financing Options with Low Credit Scores
Low credit scores and recent bankpruptcies do not mean that you can not get a Mortgage Loan, but you will pay higher interest rates. We work with credit scores as low 500 and our clients recieve the most favorable motgage loans. Many banks will not offer a home loan if you have poor credit, can't document income, or can't make any down payment. But we deal with lending specialist on a daily basis that can offer loans in these categories. We actually make loans that banks can't!
We use the Credit Analyzer in Credex to help you to examine your credit scores and make adjustments to help improve your scores and get you into the loan your looking for. Your Credex report will give you simple but detailed information as to how to improve your credit score step by step.
Understanding and Improving your Credit Score
Whether You Are Purchasing a Home or Refinancing, a Good Credit History Is Essential. Mortgage lenders must determine if you will be both able and willing to repay the debt. To judge your ability to repay the loan, they may look at many factors, including:
• Employment history
• Income and outstanding debt
• Savings patterns and amount of savings
• The type and amount of loan requested
• The amount of down payment or the existing equity in the property
But to determine your willingness to pay the debt, lenders typically look at your credit report and credit score. Don’t underestimate the importance of this part of the equation. For mortgage lenders your credit score predicts, based in part on your past behavior, how likely you are to repay the mortgage debt. Lenders will use your credit score to help them determine:
• What loan types you are eligible for
• Whether to approve your loan
• What your interest rate will be
A credit score is a number that indicates statistically how likely a borrower is to repay future debts. Who Determines Your Credit Score?
Most lenders use scores from one of the three major credit bureaus: Equifax, Experian and Trans Union. These private, national credit bureaus collect information to create individual credit records. They then generate credit scores based on that information. Each credit record includes the following data, collected from creditors and public records:
• Identifying information (name, address, employer, social security number and so on)
• Debt and payment history on credit cards, student loans, consumer loans, car loans and so on
• Previous collections
• Tax liens, judgments and bankruptcies
• Inquiries for new credit
The most common credit score issued by all three national credit bureaus is the FICO score. It is named for Fair Isaac Company, the firm that developed the mathematical formula, or “scoring model”, that generates the credit score. Credit bureaus plug in the data they have collected about your credit history into the FICO scoring model.
The FICO score ranks consumers on a scale of 300–950. Higher scores indicate lesser risk of default; lower scores indicate greater risk of default. However, there are other models as well as FICO, and they do not necessarily use the same scoring scale. For example, there are models in which a 175 would be a good score. Most lenders get credit scores directly from the credit bureaus or from a credit reporting agency that typically gets its scores from the credit bureaus. However, some lenders generate their own credit scores or get scores from a custom credit score developer. But what all these scores have in common is what factors they are based on, and what factors they are not based on.
Factors Considered in a Credit Score. The law is very specific about what may and may not be considered in a credit score. These factors are considered in most credit scoring systems:
• How you have handled credit in the past
• The amount of credit you have compared to your credit limit
• The length of your credit history
• The number and types of credit accounts you have
• How active you are in applying for new credit
• Public records pertaining to credit
These factors are NOT considered in credit scoring systems:
• Race
• Religion
• Gender
• Marital status
• Nationality
• Age
• Receipt of public assistance edit rating will improve.
To improve your credit score and imrpove yoru chances of getting approved with a lend, minimize your debt, Pay down your high credit card balances. Don’t charge close to your credit limits. The closer you charge to your credit limits, the lower your credit rating will be. APPLY FOR NEW CREDIT CAUTIOUSLY, Don’t apply for loans or credit cards that you don’t need. The more you apply for new credit, the more you may appear to be taking on more debt than you can handle, and the lower your credit rating may be. LIMIT YOUR DEPARTMENT STORE CARDS AND FINANCE COMPANY LOANS. The more department store cards or finance company loans you have, the lower your credit rating may be. Close accounts you don’t use on a regular basis or don’t really need. You NEED CREDIT TO GET CREDIT. On the other hand, having a very limited credit history can have a negative effect on a credit rating. If you don’t have a credit history, consider opening an account and using it responsibly, making the minimum monthly payments as required.
How Credit Scores Help Consumers. Credit scores speed up the mortgage approval process for most consumers. The truth is that most consumers represent very little risk and have high credit scores. Credit scores help lenders identify — quickly — which consumers are lower risk borrowers. This speeds up the mortgage approval process for most consumers.
Credit scores are not based on human judgment. Credit scores apply the same standards to everyone. Using credit scores helps lenders treat each consumer objectively. Credit scores are blind to cultural or demographic differences among people.
Important Facts about Credit Scores. Credit scores reflect credit behavior patterns. No one factor, such as a previous collection or a bankruptcy, will be the only cause of a “risky” score. Credit scores improve as your credit behavior improves. Your score is calculated based on the information in your current credit record, and your recent credit behavior weighs more heavily than your credit behavior in the past. As time passes, the relative weight of a poor mark on your credit record diminishes. However, there are no quick fixes. A short-term improvement will not cause a risky score to improve dramatically.
About Credit Reports. Review and protect your credit records. Once a year, or before applying for new credit, make sure your credit records are accurate. Check your report at all three bureaus — Equifax, Experian and Trans Union. Each bureau might contain slightly different information. If you’ve been denied credit, you can get a free credit report by following instructions in the adverse action notice. Otherwise, you can receive a copy for a minimal fee.
If your credit report contains inaccuracies, contact the credit bureau that compiled the report. The Fair Credit Reporting Act (FCRA) requires the bureau to investigate your disputed items within 30 days. The credit bureau must provide you with written notice of the results of the investigation within five days of its completion, including a copy of your credit report if it has changed based upon the dispute.
The Federal Trade Commission (FTC) is responsible for enforcing the FCRA. The FTC also publishes consumer related brochures where you can obtain additional information on credit reports. To contact the FTC, call or write:
FEDERAL TRADE COMISSION
Public Reference Branch
6th Street and Pennsylvania Avenue, NW Room 130
Washington, DC 20580
Phone: (202) 326-2222
Web Sites: www.ftc.gov/ftc/consumer.htm and www.ftc.gov/ftc/moreinfo.htm
To order your credit report by phone or Internet, contact:
EQUIFAX CONSUMER SERVICES
Phone: (800) 997-2493
Web Site: www.equifax.com
EXPERIAN
Phone: (888) 397-3742
Web Site: www.experian.com
TRANS UNION
Phone: (800) 916-8800
Web Site: www.tuc.com
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