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Working with credit is a balancing act. Excessive debt will lower your FICO score. Paradoxically, too little properly managed historical debt will also lead to a lower FICO scores; The credit reporting agency will have nothing on which to base their report. According to some analysts, the best FICO scores can be achieved if your debt is approximately 50 percent of your revolving credit limit.
So, some debt isn't a bad thing. For many of us, however, it's all too easy to get in over our heads financially. Here are some tips for repairing a bad credit rating, and maintaining a good one.
Bad Credit RepairGet the Reports: The first thing you need to do is access your credit report. You can order reports from Equifax, Trans Union and Experian, the three largest nationwide credit reporting agencies (CRAs). Order a report from each CRA. Why? Because one may contain an error that affects your credit score. Also, your creditors may not be reporting to all three agencies, so reports may differ.
Once you have your reports in hand, go through them carefully. Are there any mistakes? Are there cases of mistaken identity? Are there open accounts you thought you closed? Is ther evidence of identity theft (worst case scenario)?
Report any mistakes in writing to the CRA, following the instructions provided with your report. Call the creditors: If there is legitimate, negative information reported by creditors, they are the only ones that can remove the entry. Try contacting them, and ask to have the adverse data removed. Explain that you are trying to qualify for a mortgage, and this information is making it difficult. If you failed to pay a bill, try to negotiate a partial payoff in exchange for removal of any negative information. Take notes on your conversations and always send a follow-up letter to the creditors. Avoid temptation: Every month, we're inundated by offers to solve our financial woes. They appear in the mailbox, on television and even in our e-mail. Some of them seem like quick fixes, especially those with low introductory interest rates. Avoid the temptation; jumping to new accounts and suddenly closing old ones will worsen your rating. Give it time: Mistakes and poor financial decisions won't hound you forever. Negative information cannot be included on a CRA report after seven years. Bankruptcies will be present on your record for ten years. Good Credit MaintenanceMaintaining a good credit rating requires you to take an active role in your finances. Your FICO score is affected most strongly by how well you handle the following:
Status of your current accounts: Keeping current with all your obligations is a must for a strong FICO score. Mortgage payments count for more than revolving debt or installment loans.
Your historical credit record: A strong, consistent record of paying your bills on time, and making all payments of installment plans allows you to maintain good credit.
Other Positive Factors: Other Negative Factors: - having too many open accounts
- keeping high balances on credit cards
- making multiple applications for credit over a short period of time
- moving frequently.
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Although many of us know that our credit scores are important, fewer people think about their score until it comes time to take out a loan, apply for a credit card or engage in some other type of financial activity. In some cases, employers may even perform credit checks before hiring you.
As a result, it is important to know what factors affect your credit score. You should also be aware of what you can do to improve your credit rating in order to be in the best position possible for getting a mortgage loan.
Your credit score is one of the first things lenders look at when you apply for a mortgage. Lenders are considering whether or not to loan you a large sum of money.
Therefore, they must evaluate the likelihood that you will default on your payments. If a lender considers you a high risk borrower, they will compensate for this higher risk with a higher interest rate, a factor that will cost you more in the future.
In this section, we will go over the factors that contribute to your credit rating, how you can fix bad credit scores and the overall impact of your credit rating.Impact of Credit Scores Whether you want to buy a new car, rent an apartment or merely get a new cell phone, your credit will most likely be checked. While those with bad credit may still be able to buy a cell phone, they are far more limited if they need a new car or have to find a place to rent. As you are looking to make substantial purchases that require you to make regular payments, the company you are dealing with will not only want to make sure that you will be able to make your payments. The company will also need to determine whether or not you will be able to make these payments on time. This is where your credit score comes into play. In the most basic terms, your credit score gives various institutions a representation of the success you've had at paying your bills. Read on to learn more about the importance of your credit score. Bad Credit RepairUnfortunately, many people end up ruining their credit for various reasons. Some may open too many credit cards and become unable to repay their lenders. Others have high mortgage payments that they can’t afford, forcing them into foreclosures and ruining their credit. If you find yourself with a bad credit score, don’t worry. You are not destined to have bad credit forever, as long as you know the right steps to take. One of the first things you should do is to map out all of your debts, including the balance and monthly payment for each creditor. From here, you can prioritize these debts and begin paying off each balance. Keep reading for tips and techniques for improving your credit so you can get yourself out of debt. Credit Reporting AgenciesThe three credit reporting agencies in the United States are Equifax, Experian and TransUnion. These three bureaus are responsible for evaluating your credit rating, as well as playing a key role in helping you to prevent identity theft. Read on to learn more about the important role of credit reporting agencies.
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Mortgage applications shot up 21 percent last week compared to the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association. On an unadjusted basis, applications rose 23.5 percent.The unadjusted purchase index increased 17.5 percent compared with the previous week, but was down 11.2 percent from the same week a year ago.“Mortgage application volume rebounded last week, returning the purchase and refinance indexes to levels from mid-December,” said Michael Fratantoni, MBA’s Vice President of Research and Economics."Rates continue to hover around 5 percent, quite low by historical standards, but are well above the record lows seen in 2009, and hence are not generating substantial refi volume," Fratantoni said. "We expect that rates will rise over the next few months as the Federal Reserve winds down its MBS purchase program, and this will likely lead to a decline in refinance volume."Here are the average contract interest rate changes:- 30-year fixed-rate mortgages decreased to 5.01 percent from 5.02 percent.
- 15-year fixed-rate mortgages decreased to 4.33 percent from 4.34 percent.
- 1-year ARMs decreased to 6.70 percent from 6.84 percent.
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Beginning Feb. 1, the Federal Housing Administration will provide mortgage insurance for some purchases in which the seller bought the property and held it for fewer than 90 days.
The agency is changing what is known as the “anti-flipping rule” to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, says FHA Commissioner David H. Stevens.
Waiving the 90-day rule will encourage private investors to buy vacant properties, fix them up, and quickly sell them to buyers who will be eligible to buy them using FHA financing.
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Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.
“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio.
Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
- Large kitchens with islands
- Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows.
- Home offices
- Main-floor master suite
- Outdoor living space
- Ceiling fans
- Soaking tub in the master suite and/or an oversize shower with a seating area
- Stone and brick exteriors rather than stucco or vinyl
- Community walking paths and playgrounds
- Two-car garages, but three-car garages are even more desirable
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Fannie Mae, the largest provider of residential home funding in the United States, announced Friday that it would pay the closing costs on purchases of foreclosed homes in its inventory.The government-controlled company said buyers of qualified properties will get up to 3.5 percent in closing costs, or an equivalent amount for the purchase of new appliances.The goal of Fannie is to clear out the nearly 50,000 properties it has in inventory— listed on HomePath.com, the Web site created by Fannie Mae last year to sell the growing number of foreclosed homes."Attracting qualified buyers to the market and reducing inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover," said Terry Edwards, executive vice president for credit portfolio management, in a statement.
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The Treasury Department is announcing a plan Thursday to reduce the burdensome paperwork surrounding the foreclosure relief plan.Two changes expected to make a big difference are: - Lenders will be required to collect two pay stubs at the start of the process.
- Borrowers will be required to give the Internal Revenue Service permission to provide their most recent tax returns.
Participating mortgage service companies will be required to acknowledge that they have received a borrower’s application within 10 days and approve or deny the application within 30 days. Borrowers will still be required to make three months of trial payments before the modification is made permanent. Treasury officials are also reportedly devising a plan to give unemployed borrowers a break on payments – probably for six months – but because the details aren’t decided, the announcement won’t be made this week.
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The Federal Emergency Management Agency began updating flood maps in 2004. So far, FEMA has spent about $2 million a year to complete the projects, but the agency isn’t done yet. Meanwhile, critics in several states are complaining that the new maps are inaccurate and arbitrary. FEMA says it welcomes criticism of the new maps and is willing to make changes if there is scientific evidence available that the changes are wrong."What we're looking for is evidence, a study or survey that would provide more detailed information that can be incorporated," says Josh deBerge, a FEMA spokesman based in Kansas City, Mo.There is usually a comment period during the 18 months between a map update and the date it takes affect. During that time, community meetings will be held. FEMA urges those with criticisms to take advantage of this window of opportunity.Source: Associated Press, Michael J. Crumb (01/23/2010)
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Now is the time for home owners contemplating a spring sale to spruce up their properties in anticipation of what Mike Larson of Weiss Research calls a potentially vibrant home-selling season. "If you have been beating your head against a wall, this is going to feel a lot better,” he jokes.
Here are 10 cheap ways to make a property more attractive to shoppers.
- Improve first impressions. Touch up the paint on the front door and other areas that buyers see first.
- Clean up the landscaping. Trim the hedges and trees and plant some annuals in the flowerbeds.
- Paint the interior. A coat of light yellow or cream with contrasting white woodwork looks fresh and clean.
- Refurbish the floors. Buff the hardwoods. Install new carpets – or at least get them professionally cleaned.
- Take care of the big problems. If the house needs a roof or the front stoop is crumbling, get them fixed.
- Buy warranties. Putting appliances under warranty gives homebuyers a secure feeling.
- Improve energy efficiency. New windows or improved insulation tell a potential buyer the seller is on top of things plus they come with tax benefits.
- Replace light fixtures. Updated fixtures, especially at the entrance way and in the foyer, create a good first impression.
- Buy a stove. Home owners whose kitchen isn’t top of the line can jazz it up for a few hundred dollars by buying a new stove, which gives the room a fresh feel.
- Tidy up the bathrooms. Get rid of mildew, replace caulking and replace stained sinks.
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Forbes housing reporter and analyst Francesca Levy makes some thought-provoking predictions in the latest issue of the magazine.
She predicts: - Real estate will be an attractive investment strategy in 2010 with wealthy investors devoting an increasing segment of their portfolios to it.
- Loan modifications will result in more people who should probably be facing foreclosure slipping deeper into debt.
- Cities like Omaha, Neb., and Buffalo, N.Y., which avoided the housing bubble and most of the bust, will be models for cities trying to avoid another bubble.
- Financial troubles in Dubai will ripple through the U.S. luxury market, creating energy in a market that has been stagnant.
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The U.S. Department of Housing and Urban Development said Tuesday it's instructing lenders to temporarily suspend or reduce mortgage payments for homeowners who have tainted Chinese drywall.
Lenders also are being encouraged not to charge late fees and to give the homeowners time to make up past-due payments. The guidelines, however, apply only to mortgages insured by the Federal Housing Administration.
"We want to remove additional pressures for these families as they find solutions to allow them to return to a safe, decent and sanitary home," FHA commissioner David Stevens said.
Complaints about Chinese drywall began last year. The defective wallboard corrodes wiring, copper pipes, appliances and metals. Some homeowners blame the drywall for nosebleeds, respiratory problems and other symptoms, but the Consumer Product Safety Commission has yet to link it to any health risk.
Some residents are temporarily moving to rental housing while continuing to pay their mortgages. Homeowners say lenders have been slow to understand the problem and offer help.
Steven Roberts, whose home west of Boynton Beach has the tainted drywall, said the guidelines are needed. But he doubts that many Florida homeowners with the defective drywall have FHA loans.
"This is a great thing for those who qualify," he said.
For questions on mortgage forbearance terms, call HUD at (888) 297-8685.
The agency also announced Tuesday that federal block grants are available to states and local communities to help repair homes. HUD said 70 percent of the money must go to low- and moderate-income residents. Many of the homeowners who have Chinese drywall in Palm Beach and Broward counties bought in upscale communities during the 2000-2005 housing boom.
Still, Florida Sen. Bill Nelson was encouraged by HUD's announcement.
"This is the first real good news we've had," he said. Paul Owers can be reached at powers@Sunsentinel.com or 561-243-6529.
textSize() Copyright © 2010, South Florida Sun-Sentinel
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The 2010 plan to encourage energy efficiency is the government rebate for appliance buyers. The plan lets people swap their old appliances for new energy-efficient models at very low prices. Here are some things to keep in mind:· State plans vary. For state by state specifics, check out the state-by-state rebate program.· Is it really a deal? It may not be worth replacing appliances that are fewer than seven years old, but older models can represent a real deal. Joe McGuire, president of the Association of Home Appliance Manufacturers, says a 20-year-old refrigerator uses three times as much power as a new Energy Star-approved model.· Buy now before it ends. There is only about $300 million available and some states got more money than others. It is expected to run out fast.
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The economy grew 2.2 percent in the third quarter. The U.S. Commerce Department had previously estimated a 2.8 percent growth rate. Officials attributed the discrepancy to consumer caution, saying that consumers simply didn’t spend as much.
Many analysts still believe the economy is likely to improve in the current quarter, growing at an estimated 4 percent, or perhaps, even 5 percent. Fourth quarter results will be released Jan. 29.
Companies stocking depleted inventories will drive fourth-quarter growth, but the results will continue to reflect consumer caution. "We expect a better performance in the fourth quarter, but the core problems for the economy – bust banks and a massively overleveraged consumer – have not gone away," says Ian Shepherdson, chief economist at High Frequency Economics.
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In some parts of the country, borrowers with good credit are more likely to be able to borrow 95 percent of the purchase price than they were just a few months ago.
In Florida and other troubled markets credit remains tight and mortgage companies continue to scrutinize property appraisals, which makes it difficult for some borrowers to get financing. But in most areas of the country where prices are stabilizing or falling only slightly, standards are relaxing.
“We are starting to see...moderation," said Neil Librock, head of credit risk for Wells Fargo & Co.
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5.35% Interest Rate 1% Origination + 0% Discount *4% Assistance to be applied towards closing costs and/or pre-paids *Property must be in the Parish of Jefferson Income Limits: Family of 2 or less: $71,760 Family of 3 or more: $83,720 Purchase Price Limits: Existing & New Construction: $316,177(Single Family Residence Only)
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