Archive for the ‘Credit’ Category

THE OTHER 10 COMMANDMENTS

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When Applying for a Mortgage Loan
1. Thou shall not change jobs or become self-employed.
2. Thou shall not buy a car, truck or van unless you plan to live in it.
3. Thou shall not use your credit cards or let your payments fall behind.
4. Thou shall not spend the money you have saved for your down payment.
5. Thou shall not buy furniture before you buy your house.
6. Thou shall not originate any new inquiries on your credit report.
7. Thou shall not make any large deposits into your bank account.
8. Thou shall not change bank accounts.
9. Thou shall not co-sign for anyone.
10. Thou shall not purchase anything until after the closing.

FICO REASON SCORES

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Factors contributing to someone's credit score...

Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)

Have you ever wondered about the group of numbers following the FICO Score on your Credit Report?

e.g.  FICO Score: 500 38 21 18 05

They are not greatly complicated but are seldom used as they should be. Put simply they are the FICO “Reason Codes” and explain why your score is not higher than it is.

In the above example with the poor 500 score the meanings are:

(38) Serious delinquency and derogatory public record or collection filed. (90+ day late payments AND a public record, or account in Collection)

(21) Amount past due on accounts (current late payments)

(18) Multiple accounts with history of late payments

(05) Too may accounts with balances owed.

These are the 4 most important things related to this individual score and the things that need to be dealt with in order to improve the score.

Remember, they are not the reason your score is so low; they are the reasons it is not better.

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FICO FACTS

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CREDITOR

It’s a common misconception that if a bill is charged-off on your Credit Report it is no longer due. WRONG the Debt is still owed. If the creditor is unsuccessful in getting the account paid, it is written-off their books as a loss. The creditor has now categorized this account as late stage delinquency, and is sold for cents on the dollar to a third party collection agency for them try to collect.

COLLECTION AGENCY

The next step is the collection agency will contact you for payment of the bill. Now you are dealing with the collection agency, which is usually more aggressive than the creditor. They will call you and send you a verification of the bill and frequently stretch the law in trying to get you to pay something.

THE COURTS

If all else fails the Collection Agency may choose to sue you for the amount owed plus penalties. This could result in a Judgment against you.

IMPACT MULTIPLIED BY THREE

This result leaves you with 3 dings against you on your credit report. Each of these will have severe negative impact on your credit score, and remain on your credit report for seven years.

1. You will have the original information on the bill that was charged-off by the creditor.

2. A new account is created by the third party collection agency, which is categorized as a collection account on your credit report.

3. If the collection agency decides to sue you, a judgment is reported in the courts and shows up on your credit report.

You can see there is a snow ball effect of not paying a bill. This can have a major impact on your credit and take years to recover.

For detail help on all Credit Related Issues contact:
kstrey@scorewellcredit.com