Why is my credit bad? - Your credit maybe considered bad and causing a low score for a number of reasons. While there are numerous reasons for bad credit some of the more common ones are as follows. You have numerous credit cards that are maxed out or close to the credit limit, you have unpaid judgments or collection accounts, you have 30 day late payments showing on your payment history. All of these examples can cause severe drops in your credit score.
Here is a general guidline which outlines the five major types of information used to calculate a FICO score. Each type of information counts as a percentage of a total FICO score:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of credit
Watch on your credit report for companies that are illegally renewing the chargeoff date every month in order for the account to never gain history. These companies you should call and address this immediately.
To answer questions concerning your credit, how to improve your credit, and any other concerns - contact [name] at 415-617-5448. [name] can help you understand this very important aspect of obtaining the best mortgage for your situation.
You should frequently check your credit report at least twice a year to know what your credit profile looks like. Sometimes erroneous items appear on credit that you may not know about and when it comes time to utilize your credit it can affect the rate you will get. Depending on the state you live in, you are allowed at least one free credit report per year from each of the three major credit bureaus; Experian, Equifax and Transunion.
If you have old collections on your credit report, paying them off now can actually hurt your credit. Credit Agencies look at the age of a delinquent item: if you pay it off the "date of last activity" becomes recent instead of old. There are many reputable credit repair agencies or credit counselors that can help guide you in restoring your credit.
Paying down your credit card balances to around 30% will help your score. If you can, try to keep the balance at that level at all times. If you need to raise your score quickly, and don't have the money to pay down your balances, you may request that your creditors increase your credit limit. This will in turn lower your balance in comparison to the limit.
Only use this technique if you are responsible with your credit. Once your limit is increased, it may be tempting to go on a shopping spree. Know that if you do this, you will be in a much worse situation than when you started. Not only will you have more debt, but you will increase your ratio of balance to limit.
If you do decide to pay off some of your credit cards, be sure to leave the cards open. The credit bureaus look favorably upon accounts that have been open for a substantial period of time, especially if they are showing a zero balance.
There are several ways to increase your credit. However the fundamental principle is the bills must be paid on time. This doesn't mean by the due date. For the sake of your credit a payment must NEVER be more then 30 days late. If you are acquiring 30 day lates on your credit then your credit standing will deteriorate quickly. Judgments also hurt your credit even if you pay them.
Remember that a credit score amounts to a prediction of how likely it will be that you go 60 days late or more on your mortgage in the next two years. One thing that will really lower this score is if you carry high balances on revolving debt and then start making a few of the payments late. This is the pattern of a consumer who is close to getting in trouble with debt.
Things that may go into a collection or judgment that will hurt you credit include unpaid medical payments, unpaid utility payments, and unpaid cell phones or cable payments.
It is also important to note that a credit score is a snapshot. Although it shows your payment history, length of credit, etc., having inaccurate (negative) information removed from your credit bureau report will immediately reflect an increase in your score.
Maintaining high balances on your credit cards and other revolving debt negatively impacts your credit score. Paying down credit cards balances below the 70%, 50%, and 30% thresholds is a quick way to boost your credit score.
Your credit can be bad for a variety of reasons:
High Account Balances
To minimize negative on your factors you will need to pay down balances, make payments on time, dispute incorrect information, and let the passing of time lessen the impact of past bad credit.
If your credit score is low because of a high balance on a credit card, transfer some of the balance to another card. Try not to open a new card because to do this can also reduce your score.
One area people overlook that can negatively impact their credit report is failing to honor mobile phone contracts. Cell phone companies give away free phones to customers who sign on with their services for a specified period of time, usually one to two years. Terminating subscription to the phone service before the expiration and failing to reimburse the phone carrier for the cost of the free phone is considered breaking the contract. Cell phone companies would then report to the credit bureaus and cause a blemish on the credit history. Such blemishes are not serious, but they nonetheless lower credit scores.
Credit scores generally range from about 350 to 850.
- 800+ = great credit
- 700-799 = good credit
- 600-699 = average credit
- 500-599 = bad credit
- under 500 = hard to get a loan at all
Too many inquires at one time can affect your credit score.
One reason why your credit may be bad is because of erroneous information reported on your credit report. This can happen to anyone and is actually quite common. This is one reason why you need to check your credit report out at least once per every 12 months. By checking you credit report for free you can keep an eye on your credit and make sure that you take care of any erroneous information when it happens, not when you are trying to apply for a loan and it comes as a surprise to everyone. Utilize your one free annual credit report each year to take a look over your credit to make sure everything looks well. There are many reasons as to why credit report errors can happen so make sure that if errors do happen to you that you rectify the situation immediately.
What can I do if I have bad credit? - You may still qualify for a loan, despite credit problems you may have had in the past. In most cases you may qualify for a loan with late payment histories on your credit report, but the lender will want explanations.
You should utilize the free annual credit report and obtain a copy of your credit report at least once per year to check for errors and accuracy of the items being reported. By reviewing your credit each year you can insure you are in a better position to obtain financing for a home. There are many companies that specialize in credit repair that can help for a minimal fee to increase your credit scores also so that you can not only qualify for a home mortgage loan but for a home mortgage loan with a good rate. There are many options available for people with bad credit trying to obtain a home loan. Please call at 415-617-5448 or email at [email protected] to find out how much you qualify for based on your current credit.
In some cases a good letter of explanation (LOX) will be accepted by the lender. The letter should explain the circumstances that caused the late payments, foreclosure, etc. If you are borderline eligible for a loan then the LOX may be the fastest way to becoming approved.
Many "Subprime" or "Non Prime" banks grant mortgage loans to home buyers with bad credit. These types of "Sub Prime" mortgages usually carry higher interest rates than Conforming home loans, which are often sold to Fannie Mae and Fredie Mac. Many of the "Nonprime" loans are offered with a 2-year fixed rate followed by adjustable rates for the remaining 28 years. These types of bad credit home loans are designed to help poor credit home buyers purchase homes, rebuild or repair their credit profiles during the 2 years fixed rate period, and refinance into a Conforming mortgage with better interest rates and terms.
I have bad credit, but my spouse has good credit - What options are available? Do the both of us need to have good credit?
There are some lenders that will do an average score of both borowers to qualify the loan, this eliminates the traditional Primary Wage earner problems.
If you have bad credit and your spouse has good credit be sure too look over your credit report closely for errors. Many people have incorrect derogatory on their credit reports that will negatively affect their credit score. If you find errors on your credit report be sure to ask your preferred mortgage professional the proper steps to remove the incorrect entries.
Some lenders only care about the credit of the main borrower. If the person making the most is the one with the high score, you would be able to use the income of both borrowers and still get a good interest rate.
When a lender looks at your credit scores they will take the middle score of the three bureaus. Typically lenders will require the person who makes the most income to be the primary borrower. This can work against them if that person is also the one with the lower scores. One option is to look for what they call a best score program. With the best score program the lender will take the better of the 2 middle scores no matter who makes the most money and you can still use both incomes to qualify for the mortgage.
When one spouse has better credit than the other, there are usually many options available to them.
Contact Home Jones at 415-617-5448 or [email protected] to see what programs are available to you.
There are a number of different options available - some lenders will use the credit score of the primary wage earner, the one who earns the most. Other lenders have programs that allow the highest credit score to be used if not all of the income from the other spouse is needed to qualify. Consult with your mortgage professional to determine what options you have.
This is a very common scenario when one spouse has good credit and the other has bad credit. One possible solution is to have your mortgage professional or mortgage broker look into doing the loan in only the name of the spouse with the good credit. This may help qualify you for the best mortgage available by doing the financing in the name of only one spouse. Both husband and wife will still be on title to the home and have ownership interest in the home, except only one person will be on the actual mortgage loan. Ask a mortgage consultant (mortgage professional) about this option to see if it may be an option for you.