Las Vegas Market Watch

Financing Your Home - Your Credit Report And Your Credit Score

September 24, 2013
By Jodi Snyder
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Credit Report Overview

Cash Buyers - Decreasing In The Las Vegas Market

That means more opportunities for buyers that are financing. Many sellers were choosing cash buyers over borrowers.

If you are thinking about purchasing a home, your credit is important. Here are some steps to take to make sure that you are credit worthy to purchase your dream home.

First, find out what your credit report says. You can review your credit report for free at www.annualcreditreport.com

When you retrieve your free report look for errors when reviewing your credit report.

  • Review your pay history for all current and paid in full accounts.
  • Check you payment timelines for errors or late payments.
  • Check any collection or charge off accounts that are reported as outstanding when you know they have been paid.

Credit Score Report History

If you find errors you can contact the credit bureaus directly via

Phone:

  • Experian            888-397-3742
  • Equifax              800-846-5279
  • Trans-Union 800-916-8800 Option 3

On Line:

  • You can initiate a dispute on line. When using this option Equifax and Experian will provide updates to your request via mail.

Written Request:

  • Experian must be done on line or via phone
  • Equifax:            P.O. Box 740241, Atlanta GA 30374
  • Trans Union:     P.O. Box 403, Springfield PA 19064

Sample dispute letters can be found on the FTC website: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21/shtm

730 Credit Score

Next find out what your credit score is. Visit www.myfico.com for your current FICO scores from Trans-Union and Equifax. You can also go directly to each one of the credit bureaus to get your score. Experian is the third credit reporting bureau that you should visit.

Your FICO score infomation is weighted and divided based on the following percentages:

pie-chart

35% Payment History

  • The number of accounts which are past due or delinquent compared to the number of accounts that are in good standing.
  • The first delinquent item will have the most negative impact. Example: A person who has a 700+ score reports a 30 day late payment on his mortgage. This can have a much larger impact than a borrower who has a score in the low 600's who reports a 30 day late payment and has other late credit card payments.
  • A lengthy credit history will generally increase your score. Nonetheless, if you manage credit responsibly, you can get a high credit score with a short credit history.
  • Public record items negatively impact your score.
    • Civil judgments
    • Federal tax liens
    • State tax liens
    • Bankruptcy filings

Credit Card Character

30% Amount Owed On Revolving Accounts

  • Balances on revolving debt should remain below 30% of the credit limit.
  • Chase, CITI, and Macy's do not report the credit limit. At this time there is no resolution.
  • HELOC's can be considered revolving credit. If the account was closed, it appears as $0 causing the account to appear to be over the credit limit.
  • Student loans, such as a Parent Plus Loan, incur interest while in deferment. The loan balance appears higher than the original amount which can result in a negative impact on your FICO score.
  • The number of accounts reporting a balance can indicate that the person is over extended.

15% Credit History

  • FICO will not generate a score if the creditor's file has been dormant for over 6 months.
  • If a person becomes an authorized user on an existing account, that may add credit history to a thin credit file which may boost the FICO score. If you are applying for a mortgage, check with your loan officer to find out if this will help.

10% New Credit Accounts

Do Not Charge While Waiting For Your Loan Approval

FICO scans the credit file and searches for open dates within the last 24 months. FICO compares these to the established accounts.

Don't open new credit accounts prior to applying for a home mortgage.

Bankruptcy Clock

What Happens If You Have A Bankruptcy?

  • The first 24 months have the most impact.
  • The impact depends on your history.
  • Statute of limitations on a Chapter 7 is 10 years from your discharge date.
  • Statute of limitations on a Chapter 13 is 7 years from your filing date.
  • Rebuild your credit as soon as possible:
    • Get a secured card from a local bank or credit union
    • Maintain a balance lower than 30% of the available credit
    • Make all payments on time
    • Within 6 months, your credit history will be included in your score.

House On Graph

How Long Before You Can Apply For A Mortgage?

Conventional Loan

  • Chapter 7 is 4 years from discharge date.
  • Chapter 13 is 2 years from discharge date or 4 years from dismissal date.
  • Multiple Bankruptcy filings are 5 years if more than one filing within the past 7 years.

FHA Loan

  • Chapter 7 is 2 years from discharge date.
  • Chapter 13 is 1 year from the end of the repayment plan. Pay history must be good. Creditor must have permission from court.

VA Loan

  • Chapter 7 is 3 years from discharge date.
  • Chapter 13 is 1 year from the end of the repayment plan. Pay history must be good. Creditor must have permission from court.

USDA Loan

  • Chapter 7 is 3 years from discharge date.
  • Chapter 13 is 3 years from discharge date.

NOTES

  • Your lender will ask for an explanation letter for all inquiries reporting on your credit report for the previous 120 days.
  • Many people are not aware that when you apply for a loan, the scores that the lenders use may be different than what you retrieve. The lenders use a different algorithm so there may be a slight difference.
  • Co-signers are considered fully responsible for the entire amount of the loan.
  • To Calculate your mortgage Check My Mortgage Calculator
September 24, 2013
By Jodi Snyder