Credit FAQ - Credit FAQ
When I checked my credit scores online I had higher scores, what happened?
There are different scoring models, for instance: consumer, auto, mortgage.
I heard pulling your own credit lowers your score. Will it hurt if I look at my own?
No. The inquires that impact your score are for credit pursuit inquiries. Others, such as pre-employment, tenant, insurance, are not for the purpose of obtaining credit and so do not effect your score. Pulls on your credit may effect your score anywhere from 2 – 50 points.
I paid off my credit cards, should I close them to improve my score?
Remember that part of a good credit score is credit history. If you’ve had your credit cards for a long time, it’s probably a good idea to keep them open. Ideally create activity, but low balances. Even if you have several credit cards, if you’ve had them for a long time, this enhances your score.
Why do Finance Company Accounts negatively effect my score?
When you apply with a finance company, your score will be slightly lower than a pull through another vendor. The model assumes that you do not qualify for better credit lines, so are seeking a money source that does most of it’s business with people who have credit challenges. So, your score will be lower and your rate will be higher. If you do business with a finance company, even if you have an excellent record of paying your bills, there is not as much positive impact as through a traditional lender.
I need to have errors on my credit report taken care of quickly, so that my financing can go through.
Loan officers have the ability to get accounts cleared off of your credit report very quickly if they have the correct documentation. This is called a rapid rescore or rapid recheck. There is a cost for this service. Please note that you are paying a fee to have these items removed quickly, so that you are paying for speed, not for the corrected information. These are reported the credit repositories and are corrected at the source.
Why do I have 3 different credit scores and why is there such a big difference between the 3 scores?
You have 3 different credit scores because there are 3 main credit bureaus, or 3 main credit repositories. There is TransUnion, Equifax, and Experian. Your credit scores are different between the 3, because each one of them has their own different credit scoring model that they use. That means that different items will affect your score differently between each of them. There may be a big difference in your scores between the three of the bureaus because of many reasons. One reason could be that some creditors only report to 1 or 2 of the bureaus and others report to all 3. If one of the creditors that does not report to TransUnion and Equifax, but reports to Experian has a bad payment history on your liability with them, your Experian score could be much lower than your TransUnion and Equifax.
I paid off my credit cards and checked my credit and nothing changed on my credit report
The credit reporting companies can sometimes be a month or two behind the actual account activity so you may need to give it a little time to catch up. They also update on the 15th of every month so you need to check your credit after this date for any new activity to be recorded.
How much do credit inquiries really affect my credit score?
Credit inquires account for 10% of your total credit score. That 10% can make a big difference when you are looking to purchase a new home or refinance your existing one. It is in your best interest to shop for the items that you need (house, car, new credit cards), when you are ready to buy them. This should help cut down on your total number of credit inquiries.
Make sure that you review your credit report often and request your free reports once a year.
What can I do if I have bad credit? - You may still qualify for a loan, despite credit problems you may have had in the past. In most cases you may qualify for a loan with late payment histories on your credit report, but the lender will want explanations.
You should utilize the free annual credit report and obtain a copy of your credit report at least once per year to check for errors and accuracy of the items being reported. By reviewing your credit each year you can insure you are in a better position to obtain financing for a home. There are many companies that specialize in credit repair that can help for a minimal fee to increase your credit scores also so that you can not only qualify for a home mortgage loan but for a home mortgage loan with a good rate. There are many options available for people with bad credit trying to obtain a home loan. Please call at 888-418-4467 or email at info@TheMortgageU.com to find out how much you qualify for based on your current credit.
In some cases a good letter of explanation (LOX) will be accepted by the lender. The letter should explain the circumstances that caused the late payments, foreclosure, etc. If you are borderline eligible for a loan then the LOX may be the fastest way to becoming approved.
Many "Subprime" or "Non Prime" banks grant mortgage loans to home buyers with bad credit. These types of "Sub Prime" mortgages usually carry higher interest rates than Conforming home loans, which are often sold to Fannie Mae and Fredie Mac. Many of the "Nonprime" loans are offered with a 2-year fixed rate followed by adjustable rates for the remaining 28 years. These types of bad credit home loans are designed to help poor credit home buyers purchase homes, rebuild or repair their credit profiles during the 2 years fixed rate period, and refinance into a Conforming mortgage with better interest rates and terms.
The Underwriters View of Credit - Lenders and their underwriters put tremendous weight on the borrowers credit history. Knowing what underwriters look for is a major key in getting mortgages approved. The underwriter will first get an overall picture of the borrowers credit history:
• How has he paid for his past mortgage?
• Does he have a great deal of credit card debt?
• Does he carry large credit card balances for a long period of time?
• Has he paid his car loans and other installments in a timely manner?
• What is his average credit score?
Most of the information of past payments and account balances to available balances will be reflective of the credit score that you receive. If a file is manually underwritten the score will have more of an emphasis as well as the past mortgage history, credit card debt, balances & intallment history as the underwriting guidelines will outline exactly what is acceptable but if the file is underwritten electronically through DU, DO, or LP some of the flaws in the credit or higher balances may be overlooked if the file has a stronger loan to value (LTV) or if there are strong assets.
If a substantial derogatory item is present on the credit report, it may be necessary to secure an underwriter's exception
When an underwriter is asked to make an exception to credit policy they will be asking for whatever extenuating factors caused the derogatory credit. Examples would be job loss, accident, death in family.