Raising Low FICO Score Part 3
This is the third and last part of the comprehensive FICO workshop guide. If you have followed the three parts you should have a fair understanding of the FICO report and the ways you should proceed in order to raise your low FICO score before you apply for a loan and get declined, or even worst, get approved for a very expensive mortgage rate.
If you arrived directly to this page, check the FICO Workshop Guide Part 1.
How Lenders InquiriesAffect Your Score
How many times has one applied for credit recently? Every time a lender goes in and obtains a credit file, the score will change based on the number of inquiries shown on the report. More often than not, these inquiries will have a negative impact on the score.
Any loan officer, processor or underwriter is aware that borrowers will shop for mortgages, just as they would shop for anything else. So, common sense will rule out. If a loan officer sees ABC Mortgage Company, DEF Mortgage Company, on the credit file then logic dictates that the borrower is looking for a mortgage. If a borrower has a mortgage company pulling credit, a jewelry store, an automobile lender pulling credit at the same time, then the loan officer may want to give the file the “hairy eyeball”.
It should raise questions: What is the borrower doing in regards to credit, why are there so many inquiries, etc. The borrower will need to explain this to the underwriter and the processor on the file. Any decent loan officer will pick up on all of these inquiries and ask these questions BEFORE originating the file. Keep an eye out for inquiries that you don’t authorize. Many banks are offering programs like this, especially with all of the identity theft that is so rampant these days.
Obsolete and Inaccurate Credit Information
Obsolete and inaccurate credit information is often the single most reason a borrower is declined a loan. I will use myself as the example. In 1986, I was purchasing a vehicle for myself, nothing fancy… just a car to get from point A to point B. I was initially declined credit because of Child Support arrears from 1969. It seems that I owed child support. In 1969, I was 8 years old! It seems my father’s credit information found its’ way onto my credit file. He has the same name I do only he is “senior” and I am “junior”.
It took at least two days to prove to an underwriter that I was not him, but that it was also impossible for me to owe child support at 8 years of age. I had to sign a “Not Me Affidavit” and even after obtaining the loan approval, the underwriter wanted to approve me for a loan at a higher rate because of this information. I canceled the loan request and took my business elsewhere. My decision had nothing to do with the sales person. My decision was based solely on the fact that an underwriter not only failed to use common sense in regards to my credit file, but felt I should be penalized for something I had no control over.
Gaining Good Credit Golden Tips
As one can easily see, there are no guarantees in regards to raising ones FICO score and though it is quite tempting to absolutize that THIS will raise my score, this is not always the case. There are a whole host of variables that have an impact on one’s credit score.
So, what can one do? Live within one’s means is always sound advise. Don’t buy a Ferrari when one can only afford a Ford Escort. Don’t by jewelry, furs and other luxuries when one is trying to obtain a mortgage. Secondly, keep at least 6 months worth of payments in a separate account, so in the event you lose your job, you can keep your payments current.
Do NOT take a complete withdrawal from your 401K. Borrow from it instead so that once you are working again, the monies you borrowed are replenished and you are not paying maximum penalties and taxes on those monies when you file on 15 April.
At least yearly, check your FICO credit report and if irregularities are found, have them corrected as soon as possible. You can pay and join companies which will keep an eye on your credit for identity theft and many banks are offering at no charge the same type of service provided you have an account with them. This is to keep identity thieves from causing problems for you like opening up new credit without your knowledge.
With all of the problems with banks, mortgage companies and credit card companies that we have observed since 2007, the necessity to keep one’s credit in good shape is now exponentially more difficult than it was many years ago and it is incumbent on you, the consumer, to keep good records and correct these problems.
The Best Decision You Can Make this Year
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…