Poor credit doesn’t have to be a lifelong condition. For many, lower credit scores can be improved in as little as 6-18 months, so if your credit scores are preventing you from being approved for a mortgage, contact us to learn about how to create more buying power in your life. You can also review our Credit-related blog posts for additional tips and info.
ABC's of Credit Scoring
When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’d take by loaning money to you. FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus – Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well. Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time. Taking steps to improve your FICO scores can help you qualify for better rates from lenders.
For a complete description of what makes up your score, we have provided you a link within myFICO.com to assist you in better understanding your score. I call it the rules to the game! If you know the rules, it is much easier to play and play well. It’s about time someone shared! Go to www.myfico.com.
Understanding & Repairing Your Score
Thanks for taking the first step toward establishing a better credit score. While we are not a “Credit Repair Company” that charges fees, as mortgage professionals we have watched as credit scores have emerged as one of the single most important factors in determining a person’s ability to get the best value from every financial commitment they make. Everyone knows that a strong credit score is the key to a favorable home loan or car loan, but did you know that insurance companies now pull your score to determine the type of policy to offer you? Did you know that prospective employers may very well use your credit score as a deciding factor a factor for whether or not you will be offered a job? Your understanding of the makeup of your credit score and the factors that impact that score is crucial. In response to the increasing weight the credit score carries, we have elected to educate ourselves on the subject of the credit scoring and methods for its improvement. In doing so, we have become highly knowledgeable about credit scoring so when you apply for a loan with The Family Mortgage Team at LeaderOne Financial, we can provide you with the important information you need to understand your credit score through our 4-step process.
Our 4-Step Process
- Step One – Fill out a loan application with Leader One Financial in person, online, or by phone.
- Step Two – We will set up a time to review your report with you, providing detailed information pertaining to your specific score and items on your report. We will also help develop an individualized plan for you to repair or improve your score, as well as answer any questions you may have.
- Step Three – We will recommend a credit monitoring service that will automatically track your score for you and update you on your progress.
- Step Four – We will follow up with you periodically to provide additional guidance and support.
Here is the contact information for each of the three main bureaus.
- Equifax Credit Information Services, Inc. – https://www.equifax.com
- 1-(800)-685-1111 or 1-(888)-298-0045
- P.O. Box 740241, Atlanta, GA 30374-0241
- TransUnion – https://www.transunion.com
- P.O Box 1000, Chester, PA 19022
- *Credit Help: https://www.transunion.com/customer-support/contact-us-consumers
- Experian, NCAC – https://www.experian.com
- P.O. Box 4500, Allen, TX 75013-2104
Each credit bureau has several different addresses for various departments. When disputing, it is recommended that you dispute to the various addresses with different items. This way, you remove the risk of having your re-dispute letters end up in the hands of the person who denied your claim in the first place.
The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file in no more than seven years, except for bankruptcy, some tax liens and judgments (public records) which can be reported for up to ten years. The creditor or the credit bureau can choose to have the negative credit information deleted whenever they please. Inquiries may remain on the credit report for up to two years. Don’t let this discourage you. You can start rebuilding your credit at anytime, and if you stay current on your payments and balances, your score can get better even after a bankruptcy.
A debt collector may not use threats of violence or harm, use obscene or profane language; or repeatedly use the telephone to annoy someone, falsely imply that they are attorneys or government representatives; falsely imply that you have committed a crime; falsely represent that they operate or work for a credit bureau; misrepresent the amount of your debt; indicate that papers being sent to you are legal forms when they are not; falsely imply that you will be arrested if you do not pay your debt; falsely imply that they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; give false credit information about you to anyone, including a credit bureau; send you anything that looks like an official document from a court or government agency when it is not; or use a false name, and they may not call you before 8:00 AM or after 9:00 PM. This is only a handful of your rights when it comes to debt collectors.
There are three major credit reporting agencies. Each of them have their own score, Equifax has a Beacon score, Trans Union has an Empirica score and Experian calls their score a Fair Issac. Creditors report your activity to one or all of the three agencies. Some creditors will only report to one of the three which is why there are inconsistencies between the three credit reporting agencies. This is why it is important to check all three reports periodically.
Lenders look primarily at your FICO® credit score, which is comprised of scores from all three credit bureaus and then calculated into one using software from the Fair Isaac Corporation. This score dictates whether a borrower is eligible for a certain loan program or for what interest rate they are entitled to.
There are two types of credit inquiries. Hard Inquiries and Soft Inquiries. Only Hard Inquiries impact your credit scores negatively, and depending on the condition of your credit at the time the inquiry hits your reports, you can lose anywhere from 2-25+ points. The good news is that pulling your own credit report is considered a soft inquiry and will not impact your scores at all.
To get your own FICO® credit report and scores, go to: www.myfico.com
On the home page, select the 3-Bureau Monitoring Plus Quarterly Credit Reports $29.95 monthly subscription. Once you sign up, click the “reports” tab on the top and select the “3B” report.
When the report generates on your screen click the printer icon above the right side. In the next window, click the print button again. Choose to print as a PDF file and save it to your desktop so it will be easy to find.
Once you receive your report you can cancel your subscription immediately by calling the number shown below.
myFICO Customer Care – 1-888-577-5978
*Remember to scan your report for any discrepancies or errors. Is there an account on there that you did not apply for? Is there a company reporting a debt that is inaccurate? Are all of your credit card limits reporting? If there are any errors on your report, no matter how small, they can lead to big problems and inhibit you from obtaining credit and even keep you from getting the interest rate you deserve on your mortgage or refinance.
You can submit a dispute with each credit bureau by visiting the links provided below. *Remember to give them a detailed explanation of what you are requesting and attach copies of any supporting documentation that you have (i.e. statements proving your correct credit card limits and proof of payments).
Yes. A credit freeze can be a useful tool in protecting from identity theft and other potentially harmful activities that can affect your credit. However, it prevents lenders from making legitimate inquiries needed to complete a mortgage application. In order to apply for a mortgage, you’ll need to remove the freeze *temporarily by contacting each bureau individually. * Once you’re ready to complete the mortgage application, you can request a temporary removal to be placed anywhere from 48 hours to 1 month. Whatever you’re most comfortable with.
Each of the credit bureaus have slightly different requirements, but all will request the file access PIN issued when the borrower initially requested the credit freeze in order to unfreeze their credit. In addition to their PIN, the borrower should be prepared with the following information:
- Social Security Number
- Date of Birth
- Complete Address
- Proof of identity (birth certificate, driver’s license, Social Security card, passport, etc.)
- Proof of address (utility bill, bank statement, pay stub, driver’s license)
Below is the contact information for Equifax, Experian, and TransUnion. Again, the borrower must contact each repository to lift the credit freeze:
Phone: (888) 298-0045
Phone: 1.888.EXPERIAN (397-3742)
We Can Help
Do you have questions about your credit? Do you know if/how it’s affecting your ability acquire a mortgage? We can help educate you on your score, as well as guide you through the steps necessary to improve or repair it. Connect with one of our Mortgage Specialists to receive a customized plan to improve your credit. Simply complete our contact form by using the button below or call us at 678-483-3300. We are available M-F, 8:30am to 5:30pm (EST).