Fix Bad Credit Info

The Free FICO Repair Workshop Guide – Part 2

How To Raise A Low Credit Score II

This is part 2 of the full article discussing ways to understand and raise a low FICO score. You should check the Free FICO Repair Workshop Guide – Part 1 before continuing here.

Watch Out For Your Credit Limits

One must be very wary of any lender raising credit limits so high that the potential for “maxing out” these lines is a possibility. If one should utilize all of the credit available, this adds stress on the borrower’s ability to repay and on one’s income.

Many lenders are now using risk based pricing to determine mortgage limits and rates to determine the maximum credit available to a borrower, especially in regard to credit card limits. This is because, especially in this economy, many borrowers are using their credit cards to pay for basic necessities like food, prescription medications and the like. One way to thwart and possibly stop this from happening is to, should the credit card lender offer an increase in credit, is to refuse the increase.

The single most detrimental factor in obtaining a mortgage is to obtain new credit during the processing of a mortgage loan. In short, do NOT buy cars, boats, obtain new credit cards or do anything that would give the lender reason to believe that one is maxing out their credit.

Debt Load

The amount of debt load one carries is always a problem for a lender and is directly tied to the paragraph you just read. If one’s debt load exceeds what a one’s income can support, the loan request in all likelihood will be declined. Active lines of credit (with balances and monthly payment histories) are important in determine one’s FICO score, but they can be a detriment to obtaining a mortgage because the ratios that are used to determine total expenses versus income can be out of compliance with underwriting guidelines as well.

Age of Oldest Active Credit

Showing a track history of being responsible with a credit line that is paid on time and in full (paying as agreed), helps raise one’s FICO score. With the buyouts of many banks one may have established a credit card with one’s bank with the account being transfered many times. One must show the lender this pattern.

Firstly, by doing so, the ratios will be lowered so the same payment is not used twice in determining ratios and credit limits and secondly the lender will be less likely believe that one is constantly shopping for credit.

Negative Credit Lines

What is a negative credit line? A negative credit line on one’s credit file is any information that reflects poorly on you, the prospective borrower. Examples of this are unpaid taxes, tax liens; unpaid child support, charge offs, judgments, and any late or slow pays to other creditors ESPECIALLY mortgage companies. Mortgages must be defined.

A mortgage is any loan or instrument held against a property as collateral as a guaranty for payment. On one’s credit file, there are various codes one should be somewhat familiar with. Mtg, H/I,H/E, HELOC…all of these are mortgages and unless they are being paid off are not only calculated into the debt to income ratio  but have an impact on one’s FICO score.

Please be aware that if one does not pay any governmental debts, the loan WILL be declined and any loan officer worth his salt, will quickly pick up on this long before he writes the 1003 or attempts to send a package to the borrower for signature. With the Dodd-Frank Act of 2010, the opportunity for a loan officer to make such an “error” has been curtailed and the ability for a loan officer to throw a file against the wall to see if it sticks and is approved, has become a thing of the past, by and large.

My best advise is to take care of any and all negative information on the credit file before one applies for a loan. Keep in mind that one could pay off a loan that was in default or in charge off status, but that won’t be reflected in the FICO score for 30 to 90 days. It takes some lenders that long to change the information and as a result it could take that long for the scores to re-populate and change.

This Is The End Of The Second chapter, Click HERE for Part 3

• See Related Articles:
• How To Rebuild Your FICO Score
• 10 Tips To Raise Your FICO Score
• How Your FICO Score Affects Your Mortgage Payments
• Credit Myths That Can Cause You Financial Damage
• VantageScore Credit Scale Explained

The Free FICO Repair Workshop Guide – Part 1

Before telling you how to build a better FICO score, one needs to understand how a FICO is determined in the first place. This is the full comprehensive guide to understanding the FICO score and how to raise it and get better bank rates for your mortgage loan.

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Foreclosure? BEWARE Of “Mortgage Rescue” Companies Scam

Mortgage rescue company scams as they cause even greater instability to the housing markets. They are rocking a sinking boat. See here which scams to be alert from, and how to protect yourself when sinking down the mortgage drain.

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Minimum Requirements For USDA Direct Housing Loans

Who Can Get USDA Rural Development Direct Loans

When the mortgage markets get as tight as they are, getting mortgage loans for people with bad credit or low income, becomes ‘mission impossible’. In this review you can learn more on ways USDA Rural Development Direct Housing Loans can help you achieve a home loan, even if your income is low, or you have low credit score.

Being a homeowner is a dream many Americans can not accomplish, at present times, it becomes even more difficult for people to have any hope for homeownership. For these people the following direct housing loan plan can be the only hope for reaching their dream.

USDA Rural Development Financial Assistance

The USDA have many ways to help home buyers, in such ways both sides get their basic interests fulfilled. Not too many people know about the 0 down home loans programs the USDA is offering home buyers at specific zip codes where the federal government wishes to strengthen the community. The surprising thing about these programs is that some of the zip codes are not rural at all!

In the same way, the direct housing loans which are offered are also targeting specific rural zip codes in each of the states, but while one may expect a hut deep in Montana snowing peaks, some of the places may be just off road a few miles away from cities and towns.

What Can Be Done With The Direct Housing Loan

The loans will be granted to any kind of assistance to acquire housing for low income families. This means the money can be used for buying a house, repairing a house, renovate or relocate a home. The funds will be allowed even for purchasing land and preparing a site (paying for sewage facilities) for future housings.

So if you find a farm, a home, or a place which now looks as a wreck, by applying for the USDA direct housing loan, you may be granted a loan to rebuild the property for domestic housing needs.

When Direct Housing Loans Are NOT Approved

The definition is “Modest”. The USDA Rural Development will not approve an application for a direct housing loan for any kind of property. If the property is too ‘fancy’ or overpriced, the application would probably be declined. How can you know if the property is ‘modest’? The simple answer is to look around, do some kind of ‘appraisal comp’, compare the house to the houses down the street or location.

For example – If the house has a pool, if it is substantially larger (more rooms than other houses in the area) ,then it might not be approved by the USDA for the direct loan program.

Direct Housing Loans Minimum Requirements

The USDA is seeking to assist those who otherwise find it difficult to assist them selves. This means that the minimum requirements for the USDA direct housing loans are approved to those who otherwise will not be approved anywhere else. But since it is government backed money, even the highest risk has it’s limits, and the USDA Rural Development decline applications which seem hopeless to be funded.

Low Income Requirements

The loans will be granted to LOW or VERY LOW income families. Take notice that there is no obsolete ‘income’ amount, the income level to determine who is ‘low income’ is a factor of two parameters: Family income, and Area Median Income (AMI).

You need to check the AMI in your area (the area you plan to live in) and compare your income to the Median Income. If your income meets these limit levels, than these direct housing loans are for you:

• VERY LOW INCOME – Will be less than 50% of the area median income.
• LOW INCOME – Will be 50% – 80% of the area median income.

Minimum Financial Requirements

The direct housing loans are not grants, the loans are processed by USDA approved mortgage banks and lenders, who expect to get their money back. So families which apply must show they have the possibility to pay back the mortgage loan.

Now here is the catch.. These families should prove they can pay back the direct housing mortgage loans but have no chance to get a mortgage loan anywhere else.

So people with very low credit score (below 550) with low income levels who will be declined by any lender, can try to apply, and prove they are worth the trust of the USDA and meet the minimum USDA requirments to approve them for the loans.

What Kind Of Direct Loans To Expect

Most of the loans are issued for up to 33 years or even longer (up to 38 years!) for people who would not be able to stand the 30 year mortgage payments. The debt-to-income ratio for these families is 24%, so the mortgage payments, and the rest of the family debts, should not be more than quarter of the family income.

The loans have a limit too, you can not expect to request for loans which are higher than the average property value at the rural area. So the appraisal comps is wise to find the value of houses in the area, and request a loan which is within the reasonable home value.

Since the USDA knows that paying back direct mortgage loans still be a challenge for many families (especially when they aim at very low income levels) some of the families may expect payments assistance subsidy.

Direct Housing Loan Conclusion

Do not give up on the dream for home ownership. If you are willing to move to an area which the government call ‘rural’ and willing to commit yourself to 100% iron clad loan payback guarantee, then the USDA direct housing loans just might be your option to be a home owner at 2012.

VantageScore Scale A-B-C-D-F Letters Explained

Understanding The New VantageScore Scale

The new VantageScore credit scale uses letters and not only figures like the traditional FICO score does. Many people are having difficult time to adapt to the new credit scale, which was made to assist everyone understand their credit situation better.

The FICO score scale which runs from 350-850 is the more popular credit scale used, but with credit grades ending at 850 evaluating a persons credit position is more complicated. The new VantageScore scale may take some more time to become familiarized by the markets, but once used it is more friendly to understand.

In this short review we will try and explain the VantageScore letters scale, so next time you see a credit score in letters and not in the traditional figures, the overall picture would be much clearer.

Why Vantage Uses Two Scales – Figures & Letters

The VantageScore scale and algorithm calculates different factors, all contributing to the credit score outcome. This ‘credit score’ figure is used by lenders and credit companies to predict the financial risk from each customer and analysis the payment behavior expected from them. The score was developed by the three national credit reporting companies (CRCs) — Experian, TransUnion and Equifax  to standardize the credit ratings.

Another user for this credit score, is the customer himself. A person needs this figure to qualify for mortgages and credit cards and other loans.

The VantageScore has two scales, each developed for a different purpose. The lenders and creditors will continue to request and use the numeric figures, just like the FICO score they request and use today. The main different is that the Vantage scale runes from 501-990, so it is more intuitive to evaluate and calculate.

For example 738 FICO score is a great score, but how much better is it than 690? With the VantageScore Scale these kind of calculations are more easy to be done, and make more sense for people who are not mathematicians.

For the regular average credit customer, these factors and figures even make less sense. For the credit customers VantageScore build the easy to understand credit letter grades. The letter grades resemble the school grades which everyone remembers, thus understanding at each point the credit score situation is easy and appealing.

VantageScore Grades And Their Meanings

The VantageScore has 5 level of grades just like the school grades. On this credit scale, a person gets the personal credit score as if they were still at school. One person may get a ‘D’ score and another person will get a ‘B’ score. Just like at school, these grades are easy to follow and make sense when trying to understand the current credit position.

‘A’ Score Grade – This grade is the best grade you can achieve, like at school A students get the best treatment from the teachers, ‘A’ credit score will allow the customers to shop for the best home loans and best mortgage rates offers. The top tier of credit holders with score between 900-990 pose the least risk thus getting the best financial terms.

‘B’ Score Grade - These customers are at the top 59% of the credit holders with score ranging from 800-899 they will probably be accepted at any office and offered fairly low rates for loans and credit cards.

‘C’ Score Group – This score group will have more challenging times shopping for loans and credit rates, with Vantage Score between 700-799 they are still welcome at most lenders since they drive a high revenue. The customers at ‘C’ group are not in the ‘bad credit – not welcome’ group, they will be qualified for mortgages and will pay higher rates. Lenders fear them but need them since they will likely pay their payments on time (most of the time) and will borrow money at the higher rates than groups ‘A’ and ‘B’.

‘D’ Vantage Score – Means these customers are risky to acquire for the lenders. Lenders can expect credit troubles and delayed payments. In the eyes of the lenders lending money is an uncertain bargain, and they might need more efforts and resources to see the money paid back regularly. A score of 600-699 is very low at the new VantageScore scale, for this reason they will ‘sell’ their money at very high rates to cover losses or expected foreclosures. They will request more documentation and more down payments than other score groups.

‘F’ Score Group – People with Vantage score lower than 600 may see a ‘NOT WELCOME’ sign at many lender’s offices, lending companies are profit oriented, and lending money to ‘F’ group borrowers at current times is beyond their risk management analysis. ‘F’ grade means these people are at the lowest 19% grades from all the millions of U.S customers. If credit or loans are processed a very high interest rate will be attached to compensate for the risk involved.

Vantage Score Scale Conclusion

Most people do not realize how much they would save per year by repairing their credit score. If it is a FICO score or a VantageScore, having a low grade score means paying up to thousands of dollars each year (can reach hundred dollars per month savings!).

Repairing the credit score is easier than most people think and can be done alone with a few simple tweaks. See the following guide to help you through credit repair process in 37 days. For better and more professional results you may want to get the ‘credit repair software’ this is one of the best softwares used for self credit repair, it will pay back itself from day one, once your credit raises.

If your Vantage Score is not ‘A’ you can be a better ‘credit student’ and do something about it, any raise will allow you to negotiate lower rates or even get lower rates without even requesting, moving from ‘B’ group to ‘A’ group is like moving to the VIP lounge of the financial markets, bankers are willing to crawl in order to add a ‘A’ score to their customers list.

You may find these articles relevant too:

1. The NEW VantageScore Explained
2. Your FICO Credit Score Explained
3. How Your Credit Score Affects Your Hard Earned Money
4. How To Delete Negative Items From Your Credit Report
5. How To Rebuild a Low Credit Score

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