Credit Repair
CREDIT REPORTS & CREDIT SCORING
Is your good credit good enough?
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A credit report is the equivalent of a consumer's personal financial report card. Your credit report lists each and every credit card, car loan, mortgage or other credit accounts you've ever opened in your entire life; the length of time each of your accounts have been open (even if never used); what your past and current balances are; if you pay your bills on time; all bankruptcies, liens, foreclosures... plus any and all late payments reported by your creditors - present or past. Negative reports are supposed to be dropped from your report after 7 years, but that often doesn't happen.
"Credit Scoring" is a system creditors use to help determine whether to give you credit, and how much to charge you for it. When you apply for a mortgage, lenders will request and receive credit reports and credit scores from all three bureaus (Equifax, Experian and Trans-Union). Credit scores range from 300 to 850, but the majority of scores fall between the 600s and 700s. A credit score above 700 will get you a very good mortgage rate. A score above 720 will get you an excellent rate. A score below 700 will make it difficult for you, and credit repair should be considered.
THE SIMPLE TRUTH ABOUT CREDIT REPORTS AND MORTGAGE RATES:
The mortgage industry has changed greatly this past year. We are now governed by a system called "Risk-based Pricing". The way it works is simple: the lower your credit score, the higher the Rate or Cost of your loan.
Who should be concerned: EVERYBODY!
But what if your credit score is good and you have a large down payment, you will definitely get the best deal right? Wrong! Here's an example on a 300K purchase:
718 Credit Score, 25% Down Payment -- $1125 Penalty!
678 Credit Score, 20% Down Payment -- $3750 Penalty!
635 Credit Score, 10% Down Payment -- $6750 Penalty!
How about a 300K Cash-out Refinance?
735 Credit Score, 10% Equity -- $1350 Penalty!
698 Credit Score, 20% Equity -- $1800 Penalty!
618 Credit Score, 20% Equity -- $6000 Penalty!
*There are also many mortgage programs that now have a 740 minimum requirement! ________________________________________________________________
Sure, you can repair your credit report yourself...
You can have negative misinformation corrected. You can negotiate with creditors to remove negative postings and lower your payments. You can raise your credit score higher so you can get the loan that you want at the low interest rate you deserve. All it takes is perseverance, a positive attitude, knowledge and many, many, hours of your time.
TWO THINGS YOU NEED TO KNOW ABOUT CREDIT REPAIR SERVICES:
1) Credit Repair Companies are traditionally very expensive. They charge anywhere from five hundred dollars to thousands. Their business is based on generating fees for Credit repair. But frankly, you don't need to pay a credit repair company a lot of money to repair your credit. Anything they can do for you, you can do for yourself.
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2) Yes, you can repair your own credit report, it only takes these "simple" steps:
* Request and obtain copies of all your credit reports, from each of the big three credit reporting bureaus, Equifax, Experian and Trans-Union.
* Make sure you get your credit score, so that you can keep track of the improvement.
* Carefully review your report line by line for mistakes and outdated information. (70% of credit reports contain errors).
* Check for accounts you didn’t open, charges you haven’t made and delinquencies you didn’t cause.
* Check for identity fraud, a growing problem in this country.
* Send all your disputes with back-up documentation, via certified mail to all 3 credit agencies.
* Demand that each credit bureau send corrected copies of your report to all creditors who may have received the incorrect reports for the past six months.
* Negotiate with collection agencies to lower collection amounts and remove negative reporting.
* Keep good records so that you can follow up on the whole process.