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Alpha & Omega Financial Consultants
"Helping You Build A Better Future"
The reality of life is that your credit rating holds a tremendous influence in not only your financial freedom but also almost every other aspect of your life. From your buying power to obtaining employment and insurance ratings, the accuracy of your credit is immensely important. Ensure your future today and trust in the expert we have on staff to improve your credit rating by removing all inaccurate and erroneous entries which may be affecting your overall credit score.
Why You Need to Know Your Credit Score
BAD credit can disrupt your life. That’s why, in addition to paying your bills on time, it’s important to check the accuracy of your credit reports several months before applying for a mortgage or car loan. And these days, you also can find out your credit scores - the numbers lenders use to decide how likely you are to repay a loan.
WHY do you need to know you scores? Because the lower your scores, the higher risk you are to a lender and the less likely you are to get the best rates on loans. Checking your score with Equifax, Experian or Transunion (the 3 major credit reporting companies) before you apply for a loan can save you money if you catch a mistake and correct it. When you are buying a home, the difference between good scores and poor ones can translate into well over $100,000 over the life of a mortgage according to Microsoft Money.
MOST lenders initially use the Experian score system known as FICO, developed by Fair, Isaac and Co. Several factors go into your score, including bankruptcies, how many years you’ve had credit and the number of new credit applications you’ve made. Most consumers’ FICO scores fall between 300 and 850. Sixty percent score above 700; 27% score between 600 and 699, and 12% score between 500 and 599. The way lenders view scores varies from one institution to the next. But generally speaking, this is a rough guide to how your score may be perceived by a mortgage lender:
700 and above - EXCELLENT –
680-699 - GOOD - lenders will be favorable, but you should make moves to improve your score further. Expect to qualify for rates ½ to 1% above Excellent ratings.
620-679 - AVERAGE - the lower your score in this bracket, the more collateral lenders will require and the higher rates you may get. Expect to qualify for rates 1-2% higher than Excellent. Commercial lenders will not accept your loan request below 680.
580-619 - SUB PRIME - scores in this range are often referred to as “A- credit”. You will have to put more down and pay far higher rates than most borrowers. If you score 590, for example, and want to but a car, any loan you get will carry a high interest rate. If the average rate on a 5-year car loan is 8% at the time you apply, expect to get a car loan for 11-13%.
LOW 580 - Often referred to as “B/C-credit,” you can expect to only qualify for adjustable rate mortgages (ARMs). Consumers in this range will pay above 11% for mortgages and will need down payments of at least 20% to purchase homes.
MOVES to make a mediocre credit score or even a bad one better are not difficult. You can take steps to improve any credit score. The 1st step is to make sure that your credit history is accurate. Your scores are only as good as the information reported by your creditors to the credit bureaus. Each credit bureau may not have the same information. The 2nd step is to use the information on your credit history to improve your scores. Each credit bureau will list the top 4 reasons for why your credit score is where it is. You may find the biggest reason your scores are low is that the outstanding balances on your credit cards are too high compared to the total credit limits. Any credit score will improve if you pay off balances and pay on time.
Avoiding Identity Theft
WHAT YOU SHOULD DO!
1. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.
2. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).
But here's what is perhaps most important of all : (Most never even thought to do this.)
3. Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and Social Security number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name. The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.
If you do not contact the bureaus right away after the theft, all the damage has been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Once the bureaus have established an alert, no additional damage can be done, and the thieves will throw your wallet away (someone may even turn it in). It could stop them dead in their tracks.
Now, here are the numbers you always need to contact about if your wallet, etc., has been stolen:
1.) Equifax: 1-800-525-6285
2.) Experian: 1-888-397-3742
3.) Trans Union: 1-800-680-7289
4.) Social Security Administration: 1-800-269-0271
Preparing For a Mortgage While Your Credit is Being Repaired What Do I Need To Know!
- Do not let ANYONE pull your credit.
- Do not purchase anything on credit. If a credit purchase is unavoidable, contact your credit consultant for assistance in determining the best way of doing the purchase.
- If you need to establish additional credit, then carefully follow the instructions of the point credit consultant.
- Make sure that your checking account includes deposits for ALL income for the next months and that you have no overdrafts.
- Budget so that, as much as possible, the bills received on all revolving credit (VISA, MC, etc) show balances at 30% or less of what is available.
- Make sure all bills are paid when due. No 30 day lates.
- Do not cosign for anyone on any type of loan.
- Do not pursue any new credit cards that come saying that you are “pre-approved”.
- If you are living with friends or family, pay them a check each month for reasonable rent even if they return the money to you immediately. You need to show a track record of rental payments.
- Try to build a savings of two to three times the amount of the monthly mortgage payment that you are planning.
- If you will be receiving gift money to help in your home purchase, go ahead and get it into an account at least three months prior to your contemplated closing date.
- If you are self employed – follow the specific suggestions of your mortgage consultant in banking practices for your personal and business accounts.
- If you are married and both incomes will be needed to qualify for the home you want, make sure that you are both enrolled in credit repair.
- If it becomes necessary to move before you are able to effect your home purchase, make sure that you contact us and provide proper identification so that the credit repair process is not interrupted.
- Pay on time and pay down high limit credit balances; maintain a good history with the accounts you currently have that are not in a derogatory state.
- When all is said and done then settle with those accounts that are derogatory and have verified, updated, or confirmed your debt. (However allow your consultant to show you how!)