You Need To Build Credit: Where to Begin

 All You Need To Know About Credit, First Time Homebuyers  Comments Off on You Need To Build Credit: Where to Begin
Aug 232013
 

You need to build more good credit. I recommend opening the following accounts as a way to build credit:pile of cash

  • Sunoco http://www.gosunoco.com/ways-to-save/gas-credit-cards/
  • CareCredit: available at your Dentist. http://www.carecredit.com/apply/landing.html
  • CapitalONE secured credit card http://www.capitalone.com/creditcards/mastercard-secured-credit-card/

A secured credit card works like this: you deposit with the credit card company a pre-determined amount, say, $500. This amount is your credit limit. You swipe and use the card same as a regular credit card; the secured card activity gets reported on your credit report thus building your credit history. My advice: open the account and use no more than 50% of your “limit.” Then make MINIMUM monthly payments; don’t replenish the total amount! This type of activity gets much better results on a credit report.

  • Bank Debit/Credit Card: If your bank offers a card attached to your checking account that can be used as either credit or debit, then you should use the card as credit. Check with your bank to see if they offer this type of card AND if they report the activity to the credit bureaus when you use the card as a credit instead of debit.

Visit my Useful Links page for other great websites that provide accurate and honest advice on building credit.

 

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Your Credit Score is Less than 620 And You Want To Buy A Home

 All You Need To Know About Credit, First Time Homebuyers  Comments Off on Your Credit Score is Less than 620 And You Want To Buy A Home
Sep 282011
 

The state of the economy isn’t helping.  It’s not enough that housing sales are down, property values are declining and mortgage lending is tougher than it’s ever been.  With the state of this economy, more and more folks face daily challenges due to job loss or reduced incomes.  Their credit is suffering as a result.  Yet, these same folks still harbor the dream of owning a home.

 

We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500’s.  This is BAD credit.  If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here’s some simple advice for you.

 

It is unlikely you could be approved for mortgage financing with that credit score at this time.

Beware of any mortgage professionals promising you an approval with such a  low score. Wait on buying a home.  I recommend you take the time to resolve your credit issues.

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you’ll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related.  You’ll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.

 

Beware of anyone offering to “repair” your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams.  Find more from the FTC HERE.

 

The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

I welcome Comments for all my blog entries. I will be happy to review and approve all legitimate comments provided by readers of tcurranmortgage.com. I do not permit unfettered access to comments for obvious reasons: mortgage spammers and their ilk. If you wish to Comment on any entry, please do so and I will quickly review and approve.

Thanks for reading tcurranmortgage.com. Hope that helps!

 Posted by at 9:08 am
Jan 212011
 

This morning I attended an FHA Underwriting web-conference. While I’ve been originating FHA Insured Loans for 21 years, I think it’s important to stay up to date with guideline changes. More importantly, the web conference gave me the opportunity to speak directly with an FHA Underwriter who sees FHA loans from all walks of life and from all over the country.

I had a few questions, but my primary question had to do with clients who don’t have established credit histories.

I’ve blogged about this before here at tcurranmortgage.com because this is a situation I encounter frequently here in the NY Metro region. Many of my clients are immigrants to the United States (just like ME!), and often they have limited or non-existent credit profiles.

This isn’t a BAD thing when applying for an FHA Insured mortgage loan. Let me put it simply: BAD credit is a BAD thing; NO credit is NOT a BAD thing.
And let’s not confuse “I have no credit” with the reality I often see after hearing that statement from a client and running a credit report: When you say you have NO credit, you really mean NONE, ZERO, ZILCH, NADA. You do NOT mean no credit cards today or auto loans today because you have seven collection accounts, a car reposession, and two defaulted student loans. That’s BAD.

When I run your credit report and encounter NO credit score due to NO credit history, I may still be able to assist the client with an FHA Insured Loan.

What we’ll do next is to establish what’s called an “Alternative Credit Profile.” We can accept other forms of credit that most established adult consumers have: Rental payment histories (cancelled rent checks), Car Insurance payment histories, Cell phone, utility bill, cable bill payment histories. All of these—and other similar items—are acceptable alternative credit references.

In the absence of a credit score and established credit history with credit cards, student loans, auto loans and etc. on a credit report, these alternative credit references are perfectly acceptable to help you obtain FHA mortgage financing to buy your first home.

The FHA Underwriter happily answered my query about such situations: YES, she is seeing many FHA loan approvals with the alternative credit histories in place of an established credit history and credit score for a consumer with NO CREDIT.

YAY FHA!!!

Don’t Close those Credit Cards: Your Score could DROP

 All You Need To Know About Credit, First Time Homebuyers  Comments Off on Don’t Close those Credit Cards: Your Score could DROP
Mar 262010
 

Verify. Check it out. Read all about it. “Just the facts m’aam.” That’s me. I hate spouting off about something of which I know nothing, and which I have not verified. Maybe that’s one of the qualities that’s helped me create and maintain a successful career as a Loan Originator since 1989.

Erica, the wonderful and sharply professional office manager at Weichert Property Works in Brooklyn considered cutting up a credit card after she finished paying it off. I argued strongly against that course of action. Her credit score could actually drop if she follows that path.

It’s a little known fact that closing a credit account is almost as bad as having a collection account on your credit history. I’ve seen the results first hand in my role as Loan Originator. Let’s face it, when you’re buying a house, if you can afford to do it, you pay off your outstanding credit cards so you walk into your new home debt free! I know because I did it, too when I bought my first house. You want a clear mind and a worry-free attitude about extra bills on top of your mortgage payment. But the results on a credit score are contrary to that logic, unfortunately.

I have seen folks with fantastic credit have their credit scores drop dramatically because in the months before they met me for the mortgage prequalification they paid off and closed their credit card accounts. Perfect credit histories are affected with a lower score because 12 accounts were paid and closed and reduced to 2 or 3 accounts. I applaud that conservative thinking, but apparently the credit scoring engines don’t.

In plain English, what happens is that you have fewer active credit accounts, therefore you are using less credit therefore your credit score has less to work with in determining your overall use of your credit. That’s the flawed logic (IMHO) of the credit scoring system.

While this opinion is derived originally from my professional experience, I took the time to verify the facts with the source of all things credit score related: The Fair Isaac Corporation, or FICO, the folks who created the algorithm used in credit scoring. You can find that information right HERE.

Hope that helps! (ERICA!)

FTC Strikes Against ID Theft Protection “Guarantee”

 All You Need To Know About Credit  Comments Off on FTC Strikes Against ID Theft Protection “Guarantee”
Mar 152010
 

The Federal Trade Commission, in its advancing campaign against scams and misleading marketing with regards to credit reporting, credit scores and Identity Theft Protection, recently announced it had coordinated a settlement with LifeLock for misleading claims about its Identity Theft Protection services.

“While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” said FTC Chairman Jon Leibowitz.

LifeLock agreed to pay $12 Million to settle charges by the FTC and 35 States that Identity Theft Prevention and data security claims were false.

“This agreement effectively prevents LifeLock from misrepresenting that its services offer absolute prevention against identity theft because there is unfortunately no foolproof way to avoid ID theft,” Illinois Attorney General Lisa Madigan said. “Consumers can take definitive steps to minimize the chances of having their personal information stolen, and this settlement will help them make more informed decisions about whether to enroll in ID theft protection services.”

More information about the settelment and about LifeLock’s false claims on the Federal Trade Commission website.

Jan 212010
 

When shopping for a mortgage you need to be thoroughly prequalified. This prequalification includes a credit report. Often, clients believe that “too many inquiries” on their credit reports will lower their credit scores. This is basically UNTRUE when it comes to shopping for a mortgage.

I went to the source to verify this information: Fair Isaac which is the company that created and continues to upgrade and maintain the credit scoring systems. Their website clearly indicates that mortgage inquiries do not affect a credit score.

And I quote: “Does the formula treat all credit inquiries the same?
No. Research has indicated that the FICO score is more predictive when it treats loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans, the FICO score ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping. In addition, the score looks on your credit report for rate-shopping inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score.”

You can read this and more great information about credit scores on their website: MYFICO

Hope that helps!

 Posted by at 1:48 pm
Apr 212009
 

I heard it again tonight from a client who’s looking to buy his first home for his family: he thought because his wife had no credit that meant she had “bad” credit.

This is NOT TRUE. False. Fallacy. Myth. Mis-Information. Incorrect assumption. Bad Medicine (oh, wait, this blog is NOT “Dances With Wolves!” Scratch that last part)

If a person has no credit that just means the person has no credit score and no established credit history that a financial institution can use to determine credit-worthiness for approving a car loan, student loan, personal loan, credit card, line of credit, checking account, car insurance, or a mortgage loan. No credit means just that: here’s a person who has no established credit history.

Bad credit means just that: BAAAAADDDDD CREDIT!!! When a finance professional reviews a credit report with bad credit we encounter such things as charge-offs, collection accounts and judgments. Maybe the person owes money to a former landlord or a utility in the form of a judgment. Maybe the person had a checking overdraft account that went unpaid and ultimately wound up with a collection agency. Maybe the person borrowed a book from the library and never returned it thus racking up late charges eventually resulting in a collection account (yes, I’ve seen it), or, MAYBE the person didn’t show up for jury duty and has a judgment for a fee incurred as a penalty for not reporting to jury duty from the County Clerk’s office (I can’t believe I capitalized that for a person that sues people for not showing up for jury duty).

All of that stuff is what you can easily see is BAD CREDIT. It’s NOT “no credit.” There’s some form of credit in there and it’s bad. And it’s on the person’s credit report.

Those other folks—like my client’s wife—who don’t have any credit appearing (whether Good, Bad, or Ugly), those folks have NO CREDIT.

There’s a difference. And with FHA mortgages, a person with NO CREDIT has a chance of building an alternative credit profile and getting approved for an FHA Insured mortgage loan.

The person with BAD CREDIT (and no other credit) has less of a chance of getting approved for such a mortgage loan. Let’s say “zero” chance, and leave it at that.

But get that idea out of your head right now about No Credit meaning “Bad” credit.

Hope that helps!

Credit Basics: Let’s Get Started

 All You Need To Know About Credit, First Time Homebuyers  Comments Off on Credit Basics: Let’s Get Started
Apr 162007
 

This week I’m going to write some articles related to Credit. I’m prompted to do so by the many questions I get from prospective and current clients regarding their credit reports. With the recent Sub-Prime mortgage meltdown, I think it’s more important than ever for consumers to understand some fundamental issues about their credit reports.

Another reason for this series is to slough away unneccessary information, advertising for credit stuff you don’t need, and my constant desire to just tell it straight.

Here then, some Basics:

1. You can get a free report once a year from each of the three bureaus:
http://www.annualcreditreport.com

Personally, I think that’s all you really need to do: check it once a year. You get one free report a year and that should really be enough to stay on top of your credit score and to correct errors on your report. This should help you avoid spending money on those silly subscription services the three Credit Bureaus (Trans-Union, Equifax, and Experian) are trying to sell you everyday. (More on the bureaus and their marketing campaign later in this series)

If you’re worried about identity theft, you can always put a notification on your report that you must be contacted before any new credit is approved. You can include your telephone number in that credit alert message. A creditor must contact you to verify that you are actually the person who applied for the new credit. This is a simple method to help prevent identity theft.

(I’ll have more on the identity theft issue later in this series)

2. If you check your report and discover mistakes, fix them yourself. NEVER pay anyone to do this. The Federal Trade Commission has an excellent tutorial to guide you through the process of credit repair:
http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm

The cost to you? Your time and possibly some 39 cent stamps (yes, they’re still 39 cents as of this writing!)

The secret to credit repair success? Follow up! (More on credit repair later in the series)

3. Want to know how your credit score is calculated? Try MyFico.com:

http://www.myfico.com/CreditEducation/?fire=1

I can’t tell you how many times I’m asked this question. Unfortunately, there really is no simple answer. The credit score calculation methods used by the credit bureaus are complicated. That having been said, you can learn some basics to help you maintain or improve your scores. (Yup, that’s right, more on this topic later in the series. Do you detect a pattern here?)

4. If you have superb credit, consider opening a credit card with a bank based in the state of Arkansas. The reason most credit card companies base their operations in either Delaware or South Dakota is the law does not provide for an interest rate cap. Arkansas has a very reasonable cap, which in the 16 years I’ve known about it, has made credit cards from that state the best deal around.

5. If you had problems before or you’re new to the credit card arena, ConsumerAction.org is one of the best resources I’ve found on the ‘net for advice on rebuilding or starting anew a credit history:
http://www.consumer-action.org/

(I’ll be writing about “new” credit from the perspective of anyone who’s planning on buying a home)

 Posted by at 8:08 pm