How To Raise A Low Credit Score II
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.
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
So What is The Next Step?
If you will do nothing.. don’t expect anything to happen.
If your score is below 700, you might want to clean it yourself – get this ‘Credit Repair University’ which will save you money and time.
Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..
You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. So do your math…