Can Renting Build Credit History

 
Historically building an impressive credit history and higher score was done by paying mortgage, student, and auto loans as well as credit cards on time. The tracking of other reoccurring payments such as rent, cable, utility and mobile phone payments wasn’t taken into account. Even if someone never missed a payment they would still end up with no credit to speak of.
 
Two of the major credit bureaus: TransUnion and Experian are now incorporating rental data in the credit profiles. So paying rent on time can now be an opportunity to increase your credit score.
 
These two bureaus are gathering information through RentTrac. So renters that use RentTrac to make payments are providing information to Equifax and TransUnion.
 
A study done by RentBureau found that after Experian started gathering this information 97% of the study group built a credit score based on their payment history.
 
This also benefitted people already with credit scores also by increasing them 29 points on average.

More Changes?

While bureaus don’t currently count payments on utility, cable, mobile phones, doctors and hospitals, there is a support growing for including some of these into credit history as well.
 
The reasons for this support is because currently paying your phone bills on time doesn’t do anything for your score. However if you fall behind and it goes to collections, that will have a negative impact on your credit score.
 

Credit history, scores may improve with bureau changes by csmonitor.com

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What makes them particularly attractive is for typically shorter term loan and or mortgage finances such at 7, 10, and 15 years. A lot have very low if any closing fees usually for a little uptick in interest rates.

For creativity, Pentagon Federal Credit Union has some of the most unique loans you won’t usually find with banks or brokers and leveraged correctly could save you quite a bit of money.

One example, is this 30 year loan that is a 15/15 adjustable rate mortgage. There you start out at a lower interest rate than with a traditional 30 year loan. The beauty of this is where the typical loan is only held for 7 years it usually saves you money. However if you the loan is held after that it resets at the going rate at 15 years.

Basically the creativity behind credit unions as opposed to banks is their differences in how they view their customers. Banks are backed by shareholders and they profit from keeping you in debt forever. Credit unions’ intention is usually to get you out of debt as fast as possible for the benefit of its member owners and they are also not for profit.

Link: Credit Unions Offer Creative Mortgages to Save You Money via clarkhoward.com

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I have been in Houston, TX the last few days with one of our Regional Directors Dan Fries, who laid the ground work for this relationship, along with several other NCF consultants.

You see DR Horton having partnered with Bank of America as it’s go to mortgage lender knew that many people could not buy their dream home or for that matter their first home due to their credit scores.  As Alfredo Rodriquez, the Director of “My New Home” a pilot program of DR Horton designed to put more people into a home of their own, explained to me… they needed the best credit repair company they could find and their search ended with an agreement to have National Credit Federation as it’s sole source for those with credit challenges.  His biggest reason was… the bottom line results we get for our members with our exclusive attorney assisted process.

This event, the first of many hosted 350 folks coming through the doors, at the Westin Galleria in downtown Houston, TX, to see what all the excitement was about.  And let me tell you EXCITEMENT just doesn’t do the event justice!  It was an EXTRAVAGANZA, a huge success and honor to be a part of it!

DR Horton through Alfredo’s vision have put together a process like none I’ve ever seen.  And I’ve seen alot in this business throughout the last 30 years!  His vision starts with a simple truth…People want to own their own homes.  That said, the question becomes so “how does DR Horton as a builder help more people achieve home ownership?”   And that’s where the “My New Home” program was born and where the magic begins.

Simply stated by partnering with Bank of America, National Credit Federation, Farmers Insurance and many other top vendors for the different aspects of the home buying process that a new home buyer may experience, a better overall experience can be offered and enjoyed.

I mean even the simplest things from having pizza and cokes for the home owner planned on move in day and yes even the movers are geared up and ready to go has been thought of!

Through a better managed process, the savings a new home buyer realizes can be dramatic.  The savings range from a simple down payment offered at $100…YEP, $100 and you can get a new home under contract and  be off to the races!  Additional savings with closing costs, insurance, and yes they are even covering our fees upon closing!

Here’s the basic steps after you pick out your new home model and the lot.  Bank of America will generate an approval for you to know exactly what your payment and down payment will be (as little as 3.5%).  Actually B of A has created a brand new FHA product just for this program (I told you there is all kind of cool stuff!)  where they can help out with credit scores all the way down to 580!   If for any reason credit is an issue no matter if it’s a particular line item on your credit report or too low of a credit score that’s where National Credit Federation comes in.

It’s our job to help you get approved to remove anything that might be preventing you from achieving your goals. And check this part out…DR Horton is so confident and committed to their vision that IF YOU ENTER OUR CREDIT REPAIR PROGRAM THEY WILL CONTINUE TO HONOR YOUR CONTRACT as long as you remain in our program and refund you up to $1400 when you close!!!

Let me say that another way.  YOU CAN BE A HOMEOWNER!

Horton has kicked this off in Houston and will expand to other markets as quickly as can be managed but with friends like DR Horton and Bank of America, the number one builder and number one mortgage lender in the country well, let’s just say a ton of people that thought they could never qualify for a home are going to have their dreams realized!

To find out more CHECK IT OUT!

Be Bold!

Herschel

PS We had a professional, shooting video coverage but I don’t have that in my hands just yet.  I should soon so I’ll get that posted on the website and blog about what new things are happening as events continue to unfold!

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We are living in crazy times!

There appears to be an over abundance of homeowners on the horizon that are looking to “buy and bail”. Talking with many mortgage brokers the trend seems be be on the rise as they are experiencing more calls from prospective homeowners looking to finance a new home so they can dump their current property to buy a new one that in many cases is more home for less dollars.

This is the one of the newest trends that mortgage lenders are being watchful of as the trend continues even though Fannie Mae and Freddie Mac have pulled out all stops trying to tighten down the noose on many would be homeowners according to Meg Burns, senior associate director for congressional affairs and communications at the Federal Housing Finance Agency.

The Reality…

About 12% of all mortgage loan defaults were strategic in that the homeowner decided not to make payments even though they could afford it according to Morgan Stanley in an April 2010 report.  This rate is up over 400% from the 3% level estimated just 3 years ago.  And it is rising…

The value of homes across the country have fallen over a third from 2006 to 2009 with major losses in markets like Las Vegas down 56%, Phoenix down 55%, and Miami down 49%.  Depending on the source it’s estimated that 20-25% of single family homes are underwater as of June 2010.

The Advantages…

The reasons for doing this can appear obvious.  I mean seriously, if you owe 100k more than your house is worth and believe it can be 10 plus years before you get back to even then it makes sense to bail, right?  If you could buy a new home that has the same square footage or larger than you currently have AND save on the monthly payment then what’s there to think about?  Seems logical to me, right?

Many people are feeling as there is no light at the end of the tunnel on home prices and the longer they wait the more pain they feel.  The bailing on a home is further justified as people scramble to gain a footing on their finances for retirement and realize it makes no sense to put hard earned investment dollars into a sinking ship.

While one side of the argument says a mortgage is a moral as well as legal obligation and that if you are able to pay you should continue to do so.  However, some homeowners feel the old value won’t be seen again in their lifetime so the decision is dare I say “easy” to move on.

The Warnings…

Most people that pursue the buy and bail have good credit to begin with.  Your credit score can take a quick 125-150 point drop once you let the first property go and are hit with a short sale or foreclosure.  This alone is not stopping people from moving forward as many times this can be corrected at a later point and bottom line, some bad credit for a short time is much less costly or damaging to your financial well being than hanging on to a house that is upside down.

The FBI is currently pursuing 3000 cases of mortgage fraud so make sure your application for your new loan is true and accurate.  Robert Mueller of the FBI stated that this number is up almost 50% over last year.  “Buy and Bail”  is fraud if you submit false information so double check your decision before jumping on the band wagon.

Fannie Mae and Freddie Mac have instituted new lending criteria over the last 2 years to curb this trend.  The requirement to have 6 months reserves for both properties and banning the use of rental income for your existing home unless you can show a minimum of 30% equity have prevented some would be homeowners from qualifying.

Crazy times sometimes calls for crazy decisions.  Just weigh out the risk vs reward before jumping on the bandwagon.

Be Bold!

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In an article for Reuters written by Julie Haviv:

While low rates and high affordability have helped the housing market gain ground, it has struggled in recent months given stubbornly high unemployment and mounting foreclosures. Home loan refinancing, however, puts more cash into consumers’ hands to funnel into the U.S. economy and could help many homeowners avoid foreclosure.

Being able to take advantage of these historic low rates is essential in keeping the fixed cost of housing under control. However, being able to qualify comes down to your credit rating, income, and also the value of your home. Many people may only have one or two items in the preceding list which is why the housing market is the way that it is today.

The best thing you can do if you are not able to take advantage of these current record low rates is to start working on those three above factors so that you will be in a position to take advantage of refinancing at a low rate. This low trend should continue at this low rate for the foreseable future, but it can’t stay this low forever!

The post New Record Low for Mortgage Rates appeared first on National Credit Federation.

Your FICO scores are determined by a number of things but most importantly how timely your credit is paid and the overall amount of credit used as compared to your credit lines available.  Of course other factors come into play but these two play the most significant in determining your credit score.

Your credit score for many lenders is the biggest factor if your loan will be approved at all and at what interest rate. To give you an example I was speaking to one of our members and he was telling me he had a credit score of 552 and over the last few months had increased his scores to 632.  At first you might say not to shabby, an 80 point increase.  I agree,  an 80 point credit score increase is nothing to sneeze at and certainly looks like some solid credit repair has been under way!

This member and I’ll call him Mr G for today’s discussion.  Well Mr G was extremely happy he was able to buy a newer truck and was happy with the new financing.  The interest rate he agreed to was 10.75% interest. Certainly the upside is that he got the financing as it’s questionable if he would have been able to get financing at all just 4 months ago!  But the bottom line if he had 720-740+ credit scores his rate very well could have been around 5% or better.

When I explained to Mr G that the $20,000 loan amount over the 6 year term he agreed to at 5% vs the 10.75% would be $56.03 every month for the 72 months he had the loan.  That’s a whopping $4034.16!!  Money given to the bank simply because of a credit score.   I asked Mr G what would he do if he had an extra 4 grand socked away?  I had to laugh when he responded with a deep throated “uurrgghhh”

While things were on the right path there was much to do with getting Mr G’s credit repair in overdrive.  His mortgage loan was at 7.75% and he owed roughly $160,000.  His loan had been opened almost 5 years ago and had been paid right on time every month.   He had tried to refinance about a year ago but had been denied so he had put this task to the back of his mind.

We agreed that over the next 2 months he was going to pay his visa card down to $1000 down from the $3200 he owed on his $4000 limit so he would be at just 25% of available credit.  As well we would continue to require validation of a couple of the bad credit marks still on his credit report.  This should cause another increase in his credit scores.

The reason is that when Mr G is able to refinance his mortgage to the current rates of about 5% this will cut about $287.35 off his mortgage payment.  Over 5 years that’s $17,241 interest savings!  over 10 years $34,482 and over the life of the loan, 30 years $103,446 in total interest saved!    You should have heard his growl then!

Bad credit not only effects the interest rates of all types of loans and credit cards but can affect insurance premiums as well.  Bad credit is one of the biggest factors that keep people in credit prison.  Having good credit scores are one of the most important things to creating long term wealth!

Write me a comment back and tell me what experiences you’ve had.  To find out more… Check this out!

Be Bold!

The post Does bad credit cost me money? appeared first on National Credit Federation.

One of our consultants popped in yesterday afternoon to drop off a deal (a good thing).  He was telling me of a situation he ran into and wanted to know what kind of an effect it could have on his prospects credit score.

Well the situation was a $110k line of credit which had a balance of 96k.  This particular credit line was rated R-1 paid as agreed.  A perfect rating, right?  or was it?

Unfortunately we see this kind of thing all the time…“but wait” you say, this is a good thing!  Well, upon further investigation I found out this was actually a home equity line of credit, which makes sense.  I mean how may visa cards do you see with a 110k credit line?

Let’s look at this a couple of ways.  First thing is it’s a home equity line of credit so it’s tied to real estate which makes it a mortgage loan, right?  Well, yes, it is a mortage albiet a line of credit which by definition means revolving, right?  so is the R-1 rating correct or should it be M-1?

Survey says…it’s a Home Equity Line and while you don’t see this all the time the correct rating should be a mortgage shown as a Home Equity Line

When a creditor rates this line of credit as revolving or R-1 the FICO scoring system eats this alive because it sees 96K owed on a 110K available credit line so this person MUST be in trouble and might take a big hit to the credit scores.

When it is rated as a mortgage or Home Equity Line then FICO understands this is against real estate and grades it based more on payment history and not as heavily in the amount owed area.

So, then the question becomes “Why would a creditor do this?”  The answer is to keep your scores suppressed!  I know the truth can hurt but the reality is most creditors giving a home equity line do not want this line paid off.

Ok, so if they don’t want the line paid off then what’s the best way to keep these deals on their books?  You’ve got it!  By suppressing your credit scores, through misreporting, your options can become limited in what you might be able to do.  If your scores are suppressed you might not be able to get a mortgage refinance or another credit line at better terms so…..

It’s not fair but it is life and how most creditors play the game.  Fighting back is your right so if you find your HE Line of Credit rating like this it very well could be costing you money!  You can find out more about credit repair and should you make the effort to do it by CLICKING HERE.

Be Bold!

Herschel

The post Credit Bureaus just can't get it right! appeared first on National Credit Federation.

When you’re looking for a new mortgage many lenders evaluate your credit based on the “Three C’s.”

Credit
Is it likely that you will repay the loan? Are your payments on time and up-to-date? Are you financially stable and reliable?  What are your credit scores?  Today’s marketplace, most conventional lenders require your scores to be in the 700+ range and most FHA loans a 620 score or higher.

Capacity
Are you able to pay the loan? What kind of outstanding personal debt do you have? Do you have enough earning power and net worth to repay a mortgage or home equity line of credit?

Collateral
What is the value of the home you are purchasing?   The more money you put down the more favorable an applicant you become.   The zero down loans are pretty much a thing of the past so a down payment.  The lower the LTV or loan to value the lender is evaluating the better your odds.

There are a few more factors mortgage lenders look into when evaluating your capability of obtaining a loan. To confirm your responsibility and stability they may examine:

• Your monthly income
• Occupation and length of time with employer (two or more years is ideal)
• Home ownership status and history
• How often you move or have moved; patterns of behavior and the timing of that behavior

And there are other examples such as, if you had a charge-off (when the creditor sells your debt to a collection agency) in your credit file from several years ago and you’ve been able to maintain your credit over the years, you will be judged differently from someone who recently had a charge-off.

But whatever the case, it’s imperative to get off on the right foot when rebuilding your credit.. It is important to establish good credit behavior as early as you can in order to build a solid credit reputation.

Essentially, credit bureaus will look for five main characteristics when determining how high your credit score will be.

In descending order, they are:

1. Past delinquency. If you have failed to make payments in the past, lenders fear you will repeat that behavior based on your bad credit history.
2. How your credit has been used. Have you maxed out or spent close to the limit on a credit card? If so, then you may be considered a greater risk than someone who is more conservative with his or her credit line. Do you pay off your bill every month or a keep a revolving balance?
3. How long you’ve established your credit history. The scoring models can judge each individual separately. Credit reporting agencies may take into account the duration of a person’s credit history.
4. Frequency of credit inquiries. It is recommended that you check your credit once a year to see if you have a good or bad credit rating. Creditors requesting reports several times in a short period may send a signal that you are applying for a lot of credit due to financial difficulties, or that you are taking on too much debt and overextending yourself.
5. Your credit variety. It is best to have a mix of installment and revolving loans (e.g., auto, credit cards, retail, etc). On installment loans, a person borrows money once and makes fixed payments until the balance is gone, while revolving borrowers make regular payments, each of which frees up more money to access.

It is important to understand all the factors that determine if you have good or bad credit. It is never too early to begin building a good credit history and avoid bad credit inconveniences in the lending process.  In addition, you’ll want to perform a bit of credit repair on any of the bad credit if you have any inaccuracies, outdated or any credit items not validated being reported.

If you’d like you can find out more about your credit report by getting a free consultation (Click Here) we’d be happy to help you determine what needs to be done to “prepare you credit” before you apply for a new loan.

Post your comments and let me know your thoughts.

Be Bold!

Herschel

The post What are mortgage lenders looking for? appeared first on National Credit Federation.

What happens to your existing mortgage after bankruptcy filing?

When you need to declare bankruptcy, you usually will want to file either chapter 7 or chapter 13.  However, the consequences of filing chapter 7 are different from that of chapter 13.  The effects on your existing mortgage after filing bankruptcy are discussed below.

Consequences of filing Chapter 7:

Sometimes filing chapter 13 can be really expensive for the homeowners. In that case, filing chapter 7 bankruptcy is favorable for them. It can free you from your personal liabilities to pay back the existing debts.  However, homeowners may still be unable to keep their house after the discharge of bankruptcy depending on your state laws.  In addition there are earnings and asset guidelines that must be met to qualify.

Consequences of filing Chapter 13:

You can protect your home from a foreclosure by filing chapter 13 bankruptcy; however, it is advisable that you seek help from an experienced bankruptcy lawyer.  By filing chapter 13, you can work on a structured debt repayment plan, which can also take care of your monthly expenses. Usually, you need to repay your court trustee within 3-5 years. Chapter 13 can also give you automatic stay protection, which can prevent your creditors from suing you. It is also helpful to stop collection efforts during the repayment process.

Reaffirming mortgage debt:

If you want to save your home even after filing chapter 7 bankruptcy, then you need to file a reaffirmation agreement. Once you file the paperwork, the mortgage company may agree to work with you and also approve your plan so that you can clear the delinquent account within a specific time period. It means that you are agreeing to pay off the debt amount, which you owe to your lenders.

Paying for deficiency after foreclosure:

If your bank forecloses your property but cannot recover the unpaid debt, then you might have to pay for the deficiency.  If you are unsure if you can maintain your property and it’s debt service, then you should seriously consider when you are filing bankruptcy as the time to legally turn the property over and have the debt dissolved.

How do you qualify for a new mortgage after bankruptcy?

Go through the following steps to know how you can qualify for a mortgage even after filing bankruptcy.

1. Plan a budget and follow it – Analyze your financial status and prepare a budget. Try to follow it in order to save yourself from any more debt problems in the future.

2. Try to rebuild your credit – If you have any debts that exist after the bankruptcy discharge make sure to pay them on time. Check out using secured lines of credit or unsecured lines that you can aquire.  Even if you have a higher interest rate for a short time it will help rebuild your credit so that you can apply for a new mortgage loan within 2 years of time or so.

3. Get professional help if you’re not familiar with the credit laws to clean up the mistakes within your credit report.  It’s estimated that as much as 79% of all credit reports have mistakes and negative items reported.  If not reported correctly then credit repair may make sense and those bad credit marks must be deleted per the Fair Credit Reporting Act.

4. Check your credit reports regularly – It is really important to check your credit reports regularly. If there are errors, then fix them immediately.

5. Get ready for making a down payment – You may not qualify for a minimal down payment mortgage. Therefore, you may need to make a sizable down payment in order to qualify for the mortgage.

6. apply for FHA or VA mortgage loans – It is relatively easier to qualify for an FHA or a VA mortgage loan than that of conventional mortgage loans.

It is quite important to learn from your past mistakes, if possible. Therefore, you should not make any more late payments or leave medical bills unattended to. When you are taking out any loan/debt, you should carefully analyze your financial situation in order to ensure that you’ll be able to make the required monthly payments on time as you’ve determined in your budget as determined in the first step above.

If you’d like to find how much bad credit can cost Click Here

If you have any thoughts that might help others let me know or just let me know your thoughts on this post.

Be Bold!

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