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Killing Fico Scores
By Eleanor Thorne
Today - borrowers looing for a Conventional Mortgage loan need a credit score of at least 680 points. This is a HUGE difference from just last year where you could get financing with a 620 credit score. If you are scratching you head, and trying to get a mortgage with a GREAT rate - here are some thing you definately want to avoid... because they will KILL your scores! 1. Paying Late: The best credit scores go to those who pay their bills on time. If it was your gold, you'd lend it to the person who paid on time! The fact is, 35% of your credit score comes from your RECENT credit history. Paying your bills on time for 12 months will do WONDERS for your score - but the most important thing is to have a CLEAN report for AT LEAST 6 months.
Not Paying Bills at All: There’s some bad information floating around about allowing credit cards to be charged off - some folks think you’ve “stopped the meter,” so to speak. That’s simply not true. Charge offs are worse than late payments on your credit report. A Charge Off occcurs when the creditor thinks you’re not going to pay your credit card bills at all. They often sell this debt to collection companies for pennies on the dollar. The collection company then shows a new debt on your credit report. This can suck dozens of points from your score.
Having an Account Sent To Collections: Having an account sent to collection is a similar item on your credit report to a charge off and will kill your credit score.
Defaluting on a Loan: A defaulted loan is similar to a charge off. Charge off are generally on charge card accounts (referred to as revolving credit) and Defaults generally reflect on an installment loan (like a loan from a finance company where the payments are the same each month - or a car loan). A defaulted loan indicates that you did not meet your obligations, and is considered worse than late payments.
Judgements and Collections: This is an action that requires a creditor take you to court to place a collection or judgement against you - this definately pulls your credit score down! Once you own property - judgements and collections attach to the property as a lien. This could cause you to owe more on the property than you can sell it for! Because of this, all judgements and collections against you must be paid prior to closing on a residential property.
Filing Bankruptcy: A bankruptcy can devistate your credit score for many years. It is often better to explore consumer credit counseling options prior filling bankruptcy. It can stay on your report for over 11 years.
High Credit Card Balances: One of the most important parts of your credit score is the ratio between your high credit limit and the amount you owe. This is can be referred to on your credit report as credit utilization. For the best scores, credit balances should be no more than 30% of the credit limit. For more information about your credit score ask Steve and Eleanor Thorne 919-459-1313! At http://www.ncfhaexpert.com we recently added a ton of information about using a Credit Counseling Service - it might be worth reading too! |
http://www.ncfhaexpert.com
| Eleanor Thorne USDA Mortgage Loan Specialist
| First Time Home Buyer Credit
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