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Holiday Shopping Blues?
In a few weeks, everyone will get a shock when their credit card bills comes in- from all of their holiday spending.
It got me to thinking: What if some accidentally unpaid credit card bill kept you from buying an apartment- because your credit score was too low? I reached to a friend for a conversation about credit to learn more.
I have had the opportunity to get to know Serge Bevil of Vantage Point Credit, a true professional who has helped homeowners keep their homes from foreclosure, or in more typical situations, help save homebuyers thousands of dollars- by helping them get lower mortgage rates. He has also helped a lot of people improve their credit scores after a divorce (Click here to see a really informative video about this), something very few people realize can be devastating.
While many of us are deathly afraid of anything affecting our credit score, things happen of which we’re sometimes unaware. In these cases, and many others, improving your credit score can be the difference of hundreds of dollars of mortgage payment, getting approved for a coop apartment purchase, or even renting an apartment.
Serge spends a great deal of time working with credit agencies and other creditors to clear up issues, resolve repayment needs, etc.
Credit Cards are good for a lot of things
Before Applying for a Mortgage
Serge wrote me, “Before applying for a mortgage (3 to 6 months before), remember to:
* Pay down your credit card balances as close to “0” as possible and use them very conservatively and pay them twice a month so there is always a low reported balance.
* Make sure you are not in dispute with any creditor and look to resolve the issue before it negatively affects your credit.
* Do not apply for any credit unless absolutely necessary (e.g. buying a car with very low interest rates).
* Do not co-sign for anything as it can negatively impact your credit if the person does not pay timely.
* Do not close good standing credit cards (you’ll lose the good credit rating and lose scoring points).
* Don’t close credit card accounts and keep and outstanding limit (you will be considered over the limit until it’s paid down and will lose valuable scoring point).
* Don’t redeem your credit card points and expect to use them as payment towards your monthly statement (they can only be used to pay down your balance, and cannot be substituted as a monthly payment).
* Make sure every credit card and installment loan is paid on time and in advance, so if there’s some bizarre issue (Murphy’s Law, whatever can go wrong will go wrong), you still have time to correct.
Once you’ve taken all of this into consideration….
Before Applying for a Mortgage, Serge’s TOP FIVE TIPS:
(1) Order a 3-bureau credit report with FICO 08 scores online from either Experian, Equifax or TransUnion. This will compare side by side each credit bureaus information on your entire credit profile.
**Do not consider any other scoring model from Credit Karma, Vantage Score or others as it is not a FICO score. Lenders, Co-op and Condo boards only use FICO scores.**
(2) Check your 3 FICO credit scores (the lender will chose the middle score) and make sure it is over 740-750. This should adjust to the mortgage lenders FICO scores of 720 and above. You should be able to qualify for most mortgage lending programs and co-op and condo scrutiny.
(3) If your credit scores are below 740-750, they are being impacted by high risk factors that must be corrected. Note: Lenders adjust their interest rate to the degree of risk you exhibit, this is known as “risk based” pricing. The lower credit scores create higher risk which create higher interest rates.
Want a great interest rate? Increase your credit scores by correcting and removing your risk factors.
(4) Identify the problems. What typically impacts your credit scores are any derogatory remarks like “recent late payment history within the last two years”, “charge-offs, collections, defaulted student loans, foreclosure, tax liens and public records.
(5) Look for any discrepancies on your credit report such as misspelling of your name and AKA’s (also
known as) that you have never used and home addresses you never lived at. Also, credit inquiries that
you never authorized (credit inquires lower your credit score), or accounts that you do not recognize,
especially if they are not in good standing.
“Many honest people have been negatively affected by inaccurate credit reporting,” Serge reported.
It’s sometimes easier to bring a check to a closing
A Few More Things to Consider When Applying For A Mortgage
* Keeping high balances on credit cards lowers your credit scores and increases your chance
of default, which gets bank underwriters very nervous and could risk your mortgage approval.
* Opening too many credit card accounts and closing them soon after in a short amount of time
represents a very impulsive and potentially reckless personality, which also gets bank underwriters and
co-op boards very doubtful of your ability to handle your credit responsibly.
How to Fix Credit Issues to Ensure the Best Mortgage Rate for Your Purchase
Serge continued, “In review of these points, you should be able to immediately asses if your credit has a great profile with high credit scores and is of real value. If it is not, then it’s time to get to work and get it corrected.
Remember, credit reporting is not about being right or wrong, it’s all about the accuracy of the facts and
how those facts are being reported. We know, because we successfully correct them every day.”
And What If You Hit A Wall and Need Help?
“If after taking all of the above steps, you find yourself in need of professional credit guidance and help in
correcting your credit, please feel free to contact us at VantagePoint Credit (firstname.lastname@example.org) for additional support in
accomplishing a great credit profile with high credit scores.”
Thanks to Serge for taking time to indulge me about how to help improve credit scores! – Scott