Posts Tagged ‘CreditScore’

THE DIGNITY MORTGAGE

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About 6 years ago the greedy incompetent Banks managed to effectively take mortgages back to the Dark Ages. Since then the idea of having mortgages designed in the interest of the Borrower has been totally abolished.

Now at last we are hearing stirrings of intelligent ideas coming from the industry.

BEFORE READING THE REST OF THIS ARTTICLE PLEASE BE AWARE THAT THERE ARE NO SUCH THINGS AS “SUB PRIME MORTGAGES”. THERE ARE ONLY “SUB PRIME BORROWERS”.

Housing advocates are pushing for a new type of loan, called the “Dignity Mortgage,” They are approaching bankers and federal regulators proposing this.

The Dignity Mortgage would be geared to applicants who have rebuilt their finances since losing their homes and or jobs during the past 5-6 years, but who have been able to get steady employment and repaired their credit scores since then.

Despite this it is very difficult to get a regular mortgage from the standard lenders at this time says Faith Bautista, who heads the National Asian American Coalition.

The Dignity Mortgage would target Borrowers who had a good credit history prior to the collapse, and have been able to save at least a 10% down payment since then.

Since it would be a higher risk loan, it would come with a higher rate for a higher risk. For example, borrowers would pay 1.25 percentage points above more creditworthy borrowers (e.g. 4.75 percent if more A+ borrowers were paying 3.5 percent), the Los Angeles Times reports.

However, if borrowers made timely payments for five years, the deal could greatly improve.

“At that point, the extra money they had paid in interest would be used to reduce the mortgage balance, and their rate would be cut to whatever borrowers with sterling credit and 20 percent down payments were charged at the time the loan was made,” the Los Angeles Times reports in explaining the proposal.

Source: “New Type of Subprime Loan Pushed,” Los Angeles Times (Jan. 29, 2013)

Loan

Loan (Photo credit: Philip Taylor PT)

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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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