Good credit is more important than money in the bank. When you are ready to buy a house, a second home, an investment property or refinance your existing home, your credit report carries a lot of weight with mortgage lenders. It is not based on your character, your intentions, or your circumstances. There is nothing personal about it. It is just a piece of paper representing you and your past. If your credit report is incorrect, inaccurate or misleading, getting a mortgage to buy a home may be harder to get.
Credit rating is a system used by some creditors to determine whether to give you a loan or credit card. The creditor may examine your past credit history to evaluate how promptly you pay your bills and look at other factors as well, such as the amount of your income, whether you own a home, and how many years you have worked at your job. A credit rating system awards points for each factor that the creditor considers important. Creditors generally offer credit to those consumers awarded the most points because those points help predict who is most likely to pay back the debt.
In the mortgage lending world, FICO (Fair Isaac) scores either make or break you when it comes to obtaining a home mortgage or getting the best rate you can. This is the "mortgage rating" system used to get a mortgage from both conventional and sub-prime lenders.
It is common to find negative items on your credit report that do not belong to you. Recent studies indicate that up to 45% of all credit reports include erroneous items. Under the Fair Credit Reporting Statutes we all have the right to challenge such items. Credit reporting agencies must investigate disputed items and correct them within 30 days. They must also demonstrate that their information is accurate, and if they do not, they are in violation of the law. Anything they cannot prove must be removed from the report. A corrected version of the report must be sent to anyone who recently received the inaccurate version.
You must make your dispute directly to the credit reporting agency. Although the Fair Credit Reporting Act does not require it, the Federal Trade Commission staff recommends that you submit your dispute in writing, along with copies (NOT originals) of documents that support your position.
If your credit report shows you have open collections accounts, you can request the collection agency to remove the items from your credit if you agree to get it paid. You may also be able to get a release known as a "Settlement Letter" that authorizes the local credit reporting agency to remove it from your mortgage credit. Most collections need to be paid before you qualify for a mortgage however, several mortgage loan programs allow collections up to $500 or even higher if they were caused by a medical problem or will not attach to the title on the property.
You are also entitled to ask creditors to re-age your account (start over) so the old late payments will no longer appear on your credit record. Each month creditors send in a magnetic tape to the credit agency and if they delete your account on the tape it is automatically removed at the credit agency.
If you have been told that you were denied credit because of an "insufficient credit file" or "no credit file" and you have accounts with creditors that do not appear in your credit file, you can ask the credit reporting agency to add this information to future reports. Although they are not required to do so, many credit reporting agencies will add other verifiable accounts for a fee.
Frequently a letter of explanation will help if there are unusual circumstances. Emergencies, extended out-of-area travel during the payment period, mortgage payments which rolled over from one month to the next, banks which held checks until they cleared, medical problems, bills sent to the wrong address, items that really don't belong to you, items that were covered in a divorce settlement are just some of the possible explanations.
If you are considering buying a new home, be careful with credit inquires. Generally, lenders do not like a lot of inquires on a credit report. Excessive inquires can result in a credit denial as easily as bad credit.
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· Job stability - two years in same profession · Debt ratio (house payment, installment & revolving) not over 55% of gross income · Consumer credit - two 30-day late payments but no 60 or 90 day · Mortgage credit - no late house payments in last two years · Liens, judgments or collections paid and none in last two years. · Bankruptcy – at least four years since discharge - excellent credit since | Best Interest Rate Loan-to-value 95%-97% of appraisal Rate and Term Refinance – 90% LTV Cash Out Refinance – 80% LTV |
| "AX" CREDIT · Good credit last two years · Job stability - two years in same profession · Debt ratio (house payment, installment & revolving) not over 55% of gross income · Consumer credit - up to four 30-day late payments, no 60 or 90 · Mortgage credit - one late payment in last 12 months · Liens, judgments or collections must be paid if they affect the title to the property · Bankruptcy – at least four years since discharge - good credit since | Best Sub-Prime Interest Rate Loan-to-value 90% - 95% of appraisal Rate and Term Refinance – 90% Cash Out Refinance – 90% Stated Income Program – LTV 85% Investment Property – 80% |
| "A-" CREDIT - · FICO not a factor – good credit last 12 months · Job stability - two years in same profession · Debt ratio (house payment, installment & revolving) not over 55% of gross income · Consumer credit - up to four 30-day late payments, one 60 but no 90 · Mortgage credit - one late payment in last 12 months · Liens, judgments or collections must be paid if they affect the title to the property · Bankruptcy – at least four years since discharge - good credit since | Slightly Higher Interest Rate Loan-to-value 85% to 90% of appraisal Rate and Term Refinance – 90% Cash Out Refinance – 90% Stated Income Program – LTV 80% Investment Property – 80% |
| "B" CREDIT · Fair credit last 12 months. · Job stability – 18 months in same profession. · Debt ratio (house payment, installment & revolving) not over 55% of gross income. · Consumer credit - up to five 30-day late payments, one 60 and one 90. · Mortgage credit - three 30-day late payments, no 60 or 90 in last 12 months. · Liens, judgments or collections must be paid if they affect the title to the property. · Bankruptcy – at least four years since discharge - good credit since. | Higher Interest Rate Loan-to-value 80% to 85% of appraisal Rate and Term Refinance – 85% Cash Out Refinance – 85% Stated Income Program – LTV 75% Investment Property – 75% |
| "C" CREDIT · Fair credit last 12 months. · Job stability - one year in same profession (can be six months). · Debt ratio (house payment, installment & revolving) not over 55% of gross income. · Consumer credit – 30-day late payments not counted, five 60, three 90. · Mortgage credit – twelve 30-day late payments, one 60, one 90 in last 12 months. · Liens, judgments or collections must be paid if they affect the title to the property. · Bankruptcy – at least two years since discharge - fair credit since. | Considerably Higher Interest Rate Loan-to-value 75% to 80% of appraisal Rate and Term Refinance – 80% Cash Out Refinance – 80% Stated Income Program – LTV 70% Investment Property – 70% |
Following is a list of credit reporting agencies. It is important to make your dispute directly to them.
Experian
P.O. Box 2104
Allen, TX 75002
Phone (800) 682-7654
Equifax Credit Information Services
P.O. Box 740256
Atlanta, GA 30374
Phone (800) 685-1111
TransUnion
P.O. Box 390
Springfield, PA 19064-0390
Phone (601) 933-1200
CSC Credit
652 North Belt East, Ste. 133
Houston, TX 77267
Phone (713) 878-1900
OnePipeline.com offers you other contacts and agencies that may be able to offer help for your particular credit assistance needs.
Bankcard Holders of America (BHA)
524 Branch drive
Salem, VA 24153
Phone (703) 389-5445
National Fraud Information Center (NFIC)
10 a.m. - 4 p.m. EST, Monday - Friday
Phone (800) 876-7060
National Foundation For Consumer Credit
8611 2nd Ave., Suite 100
Silver Spring, MD 20910
Phone (800) 388-2227
Debtors Anonymous, General Service Board
Box 400, Grand Central Station
New York, NY 10163-0400
Federal Trade Commission
(Fair Credit Reporting Act)
Washington, D.C. 20580
Phone (202) 326-2000
Division of Consumer and Community Affairs,
Board of Governors, Federal Reserve System
20th & C Streets, N.W.,
Washington, D.C. 20551
When requesting information or disputing information on your credit report – always include: Your full name, spouse's full name (if relevant), your current address, your previous addresses going back five years, the date of your birth, your social security number(s) and phone numbers (home and work).
If disputing information include: your credit ID# from the reporting bureau, the account name you are disputing, the account number and the reason you are disputing the item.
After the credit reporting agency receives your letter it has 30 days to investigate any requests and is required to send you a written report of its findings.
Credit reporting agencies are required by law to send you a free credit report if you have been denied credit.
To Whom It May Concern,
Please send me a copy of my most recent Credit Report. I have enclosed the following information to identify myself (copy of driver's license, recent utility bill, etc.), and have enclosed $8.00 to cover the cost of your sending me my report. Should you have any questions, please contact me at my address or phone number as shown above.
Thank you for your services in this matter.
To Whom It May Concern,
Enclosed is a copy of my credit report. Please note the highlighted item(s). These items are incorrect. Please remove them from my file immediately.
Thank you for your services in this matter.
To Whom It May Concern,
The following listed errors on my Credit Report are incorrect.
List errors:
E.g., This account number is not correct:
Name of Account__________________ Correct Acct. #:________________
My account with this Credit Union is in good standing although you indicate on your report that I was late in my payments 30 days twice and 60 days once. I have never been late in my payments to this account.
I shall expect your prompt attention to this matter in writing.
To Whom It May Concern (or name if you have one)
I received your response regarding the item(s) I requested that you investigate on my credit report. Your response claimed that you verified the items(s) as correct as presented on the initial report. I am sure you did a thorough investigation, but I disagree with the results of your investigation and want the inaccurate items removed from my credit report.
I am requesting for the second time that you correct the problem on my report. It is imperative that you re-investigate these incorrect items because they are still causing serious and damaging impact on my current financial status. This is very important to me and I will take whatever actions are necessary for my self-defense, including legal action to recover my financial losses.
I am enclosing a copy of my original letter to you along with my credit report. Also, I am aware that the Fair Credit Reporting Act allows me to request that you provide me with the name(s) and business address(es) of those merchants with whom you verified this information. I want to directly contact the person supplying you with incorrect information that continues to appear on my Credit Report.
As I understand my legal position, you are liable for this error. If this issue is not corrected immediately, I shall be forced to take stronger action against your organization.
To Whom It May Concern,
A written investigation request was made to you concerning certain disputed items on my Credit Report on (date of your first letter) Please see the enclosed copy of my letter to you along with photocopy of returned postal receipt. As of this writing, I have not received your reply as requested.
I have been made aware through legal counsel that, according to the Fair Credit Reporting Act, you must respond to my request within a reasonable period of time as to your findings. Thank you for your help in resolving this matter expeditiously.
To Whom It May Concern,
I am writing to you to request that you delete certain information from my current credit report that has become obsolete.
I refer specifically to the information highlighted on the enclosed copy of my consumer credit report. This information is obsolete and should be removed. Please look into this matter and delete this information from my records on your credit files promptly upon receipt of this communication.
To Whom It May Concern,
In reviewing a copy of my credit report from your agency, I discovered certain important, relevant information that attests to my credit-worthiness is missing. As such, please add the following to your records for my credit file:
(List accounts with account #, name on the account, creditor name and address)
I have included a copy of my most recent credit report and have detailed the information I would like to have added to it. Please note that I have included all relevant account numbers as well as the complete names and addresses of all pertinent creditors. In the event that you require any further information, please contact me directly at the telephone number or mailing address provided below. Please advise me of any fees that may be required to expedite your updating of my record(s).
To Whom It May Concern,
I have learned that several payments to my account have been marked as "late" on my Credit Report. Please note that I have always been prompt in making my payments in the past. I have only been late with one (number) of payments because (Give Details).
Because of the circumstances and my overall excellent record, I would like you to contact the following Credit Bureaus and correct the records on my payment history.
Since this late payment was the result of the above excusable reason, please correct the payment history for my account at the following Credit Bureaus, which handle your organization's account histories:
(Provide Credit Bureau names and addresses)
It is imperative that my Credit Report exemplifies the good relations I have enjoyed with your business in the past, and that the corrections in the report are more representative of my good financial habits.
Thank you for your assistance in this matter.
THIS AGREEMENT is entered into on (date), between (your name), residing at (your address, city, state and zip code)
and (name of creditor), conducting business at: (creditor address, city, state and zip code) .
Whereas, Debtor and Creditor have previously been engaged in a certain commercial transaction, and
Whereas, certain circumstances subsequently developed which caused both Debtor and Creditor to desire to enter into this agreement.
Therefore, based upon the mutually agreed upon promises contained herein:
In Witness Whereof, the Debtor and Creditor have affixed their signatures to this agreement as of the date shown above.
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| Debtor | Date | Creditor | Date |