Posts Tagged: ‘credit score’

How does your credit score measure up?

December 13, 2013 Posted by Andre Hemmersbach

Every once in a while I will get a customer that wants to know how his score compares to the average person. So I did a little research and was surprised to find out that credit scores were not dispersed as I had thought.

Your credit score is a numerical reflection of the quality of your credit based on statistical logarithms developed by some brainiac math geniuses that will not release the exact formula they use. But the generalities break down like this:

Payment history, length of credit history, recent inquiries, number of accounts and used credit vs available credit. For more on how credit scores are generated and how you can raise your score see How a credit score is figured

Back to credit score averages. Statistically, I was expecting to find a bell-shaped curve where the majority of people are in the middle and that either end of the spectrum (lowest and highest scores) would have less people. Apparently credit quality is fairly even across the board. See the chart below to see how you compare.

Its important that you know your credit score and that it accurately reflects your credit history as generally speaking the higher the credit score, the more likely you are to be offered better credit terms.

If I can be of any assistance in educating you about your credit score in preparation of buying your home, please call me.

 

 

Anatomy Of Your Credit Score

November 23, 2013 Posted by Andre Hemmersbach

A Credit Score is a number that ranks a consumer’s credit risk based on a statistical evaluation of information in the consumer’s credit file. In layman’s terms, it’s a number that represents the risk that you will default on a loan, using your prior payment history and other factors as a benchmark. Statistically speaking, the higher your credit score number the less likely the lender will experience delinquencies or a default on your account. Different industries use different credit score products. For instance mortgage lenders rely on FICO or the Fair Issac Credit Company score to determine your credit risk level for home loans. A car dealer and a credit card company may rely on different credit score products. Each mathematical algorithm used to calculate credit scores is unique and extremely complex, so the information below is a simple explanation of how a FICO credit score works.

A FICO score is based on five different weighted factors as presented in the pie chart below:

The most common question I hear about a borrower’s credit score, is how to quickly increase the borrower’s representative score, so that we can get the borrower approved for a home loan. Sometimes we can also quickly improve a score to get a client a better rate and fee combination. The basics for increasing your credit score are all related to the weighted factors in the chart above and have to do with:

  • Correcting any delinquent payment histories that are incorrect.
  • Paying off account balances.
  • Rearranging account balances.

We have tools available by which we can create a plan that actually allows us to try different credit scenario fixes and measure the resulting credit score improvements. This new tool has already saved many of our clients time, money and frustration and is not available through your standard mortgage conduits. If you are looking to purchase a home in the next six months I would highly recommend a free credit consultation to make sure you have the best possible chance of getting the lowest interest rates on your mortgage.

Finally, when dealing with credit score issues it’s best to get help from someone who understands how credit scores are figured.  Attempting to raise your credit score yourself could be counterproductive as simple mistakes made during the process can actually decrease your credit scores delaying or making your home loan more expensive.  Please call me if I can help you.

Basics of Negotiating with Collection Agencies

May 10, 2013 Posted by Andre Hemmersbach

These simple tactics work on unsecured debt only, mainly credit cards to include department store cards, medical bills and bounced checks. You cannot negotiate on Liens, Judgments and other items.

Remember you always want to negotiate for removal of the derogatory item.

  • An old unpaid collections account is far better for your credit score than a recent paid collection account.  A paid collections account is a negative mark on your report, therefore always negotiate for the removal of the derogatory item!

There are two basic methods to negotiate with collection agencies.

First of all you will want to negotiate with a manager, not some customer service rep as they usually don’t have the authority. It’s also important to only work with them via written letters or email so you have a paper trail.

1)      Payment in Full. Let’s say you have a $500 debt with an agency. Offer them $200 to settle the debt and to have the item removed from the Big Three (Trans Union, Equifax and Experian). They have probably only paid pennies on the dollar so trust me, they are profiting and willing to work with you most of the time. Do not let them simply update the item to a paid collection or paid account.

2)      Set up a payment plan. If you don’t have the cash on hand offer to make monthly payments  which you can afford and make sure to get the agreement in writing! It can be a simple written contract which states that the collection or derogatory rating will be removed after the agreed upon amount is paid in full.

If you have any questions regarding this or any other tips on increasing your credit score please call me.

Don’t Let Your Credit Cost You Money

July 2, 2012 Posted by Andre Hemmersbach

I Want The Top Ten FICO Drivers

New Law To Help Los Angeles and Orange County Real Estate?

November 19, 2011 Posted by Andre Hemmersbach

On Friday morning November 18th, President Barack Obama signed a bill that among other things will specifically aid real estate sales in high cost areas of Los Angeles and Orange Counties. In fact this is quite a surprising move by the administration and congress seeing all the rhetoric coming from Washington about the federal government getting out of the mortgage business.

The last two years  have seen the mortgage industry get very conservative as a whole. There have been a barrage of “take-a-ways” from Fannie Mae (FNMA), Freddie Mac (FHLMC) and the Federal Housing Administration (FHA), the institutions that are guaranteed by the US Government and purchase the majority of all mortgages today. These changes have made getting a home mortgage more difficult. One such recent change that just took effect on October 1, 2011 was the decrease in the temporary loan limits from $729,750 to $625,500. The law that went into effect today, returned the maximum loan limit for FHA to $729,750 for single family residences and condos until the end of 2013. No changes were made to the maximum loan limits of FNMA or FHLMC.

After the drop in the maximum loan limits sales of properties in Orange and Los Angeles counties with loans between $625,500 from $729,750 fell sharply, to 102 last month, according to San Diego real estate firm DataQuick. That was a 71% decline from 350 in September and down 71.5% from 358 sales in October 2010

How successful this move will be in stabilizing the real estate market will have to be seen. FHA is predominately used by first time homebuyers because it is less restrictive in income qualification and credit requirements, only requires a minimal 3.5% down payment (all of which can be a gift) and allows for non occupant borrowers such as parents trying to help their children qualify for a home. One of the few draw backs of FHA financing is that all FHA loans regardless of down payment require mortgage insurance. Besides how many first time homebuyers purchase a home in the $675,000 range?

 These institions are backed by guarantees made by the US government. As financial losses from the real estate implosion have mounted and regulations from the financial reform acts have become constrictive  other sources for mortgage money has become very scarce.

 . . Currently the Federal Government guarantees loans purchased by FNMA, FHLMC and FHA and over the last 3 years other sources for mortgage money has become very scares.

This is something that will help buyers using using FHA ) financing. F