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It’s All About The Credit Scores – What You Really Need to Know About Your Credit

July 21, 2014

PMC Credit Enhancement

High credit scores are essential whether you are applying for a home loan, a job or even insurance.  Every 20 points you increase your score can save you on average .25%, which may not seem like a lot, but for a $250,000 30 year fixed home loan it could be a savings of $9,518.21.  Portfolio FHA mortgage financing is available for those who have a 619 or lower middle FICO score and may have to pay 1% more than a  standard FHA loan, which would be $39,475.57.  That is a huge difference!

It is always best to pay off or down balances under 25% of the credit limit about 90 days before you apply for anything.  It may take some time for the updated balances to show up with the credit bureaus.  Try not to close any good standing accounts.  Believe it or not you will lose 20 points for each one.  For your protection, if the account has no activity after 2 years the creditor will close it for you and you will not lose any points.  Seems backwards right?  You are also graded on how long you have had ab account open, how much credit you have been granted and how much of your credit is being used.  People with 740+ credit scores have several good standing open accounts that they are not using.  “A paper” borrowers have minimal requirements that are needed to get approved, which is normally just 2 forms of identification.  So, that is your goal!

Credit boo-boos are a killer!  Make sure to set up automatic payments for all of your accounts in order to prevent having late payments.  Late pays, repossessions, collections, judgments, liens and bankruptcies can decrease your score 60-110 points! Most importantly, remember that a mortgage is one of your largest purchases that you will make in your life time.  If you go into foreclosure you can lose up to 250 points. Can you say “ouch”?

Junk debt buyers pay pennies on the dollar for charged off debt and then legally send you a “offer” letter and your silence puts you into an agreement.  Then they legally can place a collection on your credit report and injure your credit score.  Paying off collections that are older than 12 months old will drop your score if the collection company adds a new “last date of activity”.  If you are planning on paying for the collection, ask the junk debt buyer for a “pay and delete settlement offer” first before you “make an agreement to pay anything”.  Offer 25% and see if they accept it.  The worst they can say is no.  If you take a simple extra step you can ask for “debt validation”.  If they can’t supply you with a “wet ink signature contract” that binds you with their company, which they don’t have, legally they have to remove the debt from your credit file.  If not, you have the right to sue them for $1000 for each violation.

Try not to apply for too many accounts unless you are shopping around for the best loan offer.  You lose 5 points for each type of credit inquiry every 30 days.  Credit inquiries take 2 years to fall off from your credit file.

It is too bad they don’t teach us this stuff in high school or college.  This could save us from a lot of heartache and misery in our adult life.  Doesn’t it seem like we are being set up to fail on purpose?

Great sites with additional information and resources are: – You are entitled to a free credit report every year. – A plethora of credit and finance tips. – Free score monitoring and tools to help you become credit savvy. –  Free score monitoring – stop paying for your score! – Need legal answers about credit? – Get the scoop on DIY credit repair. – Find out about your consumer rights.

PMC offers free credit analysis and credit enhancement.  Together we can boost your scores to get the best home loan available and save you a ton of money for your retirement.

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