How can I correct mistakes or dispute information on my credit report?
It’s not easy, but it can be done. Credit bureaus are legally required to investigate disputed information by contacting the creditor that originally supplied them with the information. The three major credit bureaus usually have the same information for each consumer file — but not always. You need only contact the bureau that actually shows an error.
Factual information cannot be removed from a credit report, and the credit bureaus will not automatically remove information from your reports just because you dispute it. You have to prove that information is wrong with supporting documentation before a credit bureau will correct a report. Under the Fair Credit Reporting Act (FCRA), a credit bureau must within 30 days remove or modify a disputed item if it is found to be inaccurate, incomplete or cannot be verified after a reasonable investigation.
Contact information for the three major U.S. credit bureaus:
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Experian P.O. Box 2002 Allen, TX 759013 (888) 397-3742 www.experian.com |
TransUnion P.O. Box 1000 Chester, PA 19022 (800) 888-4213 www.transunion.com |
Equifax P.O. Box 740241 Atlanta, GA 30374 (800) 685-1111 www.equifax.com |
* W.J. Bradley is not a credit counseling or financial advisement firm and this information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.
Credit scores affect your life — beyond just mortgage interest rates.
Credit scores are often used in determining prices for auto and homeowners insurance. Employers have also begun using the scores as part of background checks when making hiring decisions.
The practice of using credit scores in nontraditional ways is expanding. It’s more important than ever to educate yourself about credit. If you have more questions, I can help you find local resources to provide you with credit counseling and more in-depth information.
Check your credit score at least once a year. Correct any errors and take steps to improve your credit. Maintaining a healthy credit score will smooth the way for you to achieve many of your future goals.
* W.J. Bradley is not a credit counseling or financial advisement firm and this information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.
How Long Before You Can Buy After a Foreclosure?
Foreclosures really affect your credit and ability to borrow. In fact, it could be 7-8 years before you can get a mortgage to buy a home again.And, credit scores are only one component of a decision by an underwriter. They will also look back to see if you just
walked away from the home while you could have kept paying the mortgage or if the foreclosure was the result of a job loss, health issue, etc. The reason makes a difference.
If a strategic decision was made to default, it will work against you. Underwriters will also look at your current situation – how much money you have in the bank, do you have a current job, what is your current income, etc. They compare that information with your past history – employment, payment history, etc., when assessing whether to give you a mortgage or not.
And, in the end, you will probably need a slightly bigger down payment and you may pay a higher interest rate to get the loan. However, it will be much easier for you if the default resulted from factors that were beyond your control. So, the lesson here is that while walking away may solve a current problem, a price will be paid in the future. Before you just walk away, explore all your options – refinance, loan remodification, etc.
Reductions in Home Prices
According to Zillow.com, 30% of the houses for sale nationally were reduced in price in June 2010. The reason for this is attributed to sellers having difficulty pricing their home against foreclosed homes that lenders are trying to sell (often at a discount of 20-30%). What does this mean for sellers? They need to get a handle on the current market condition, rather than what has happened in the past, and price their home to sell in today’s market.
A Note on the New FHA Rules
The Federal Housing Administration has announced major changes to its program. The agency will increase the amount of upfront cash paid by new borrowers and require higher down payments from those with the poorest credit.
Upfront insurance premiums paid at the closing table will increase to 2.25% of the loan value, but buyers will be able to finance the premiums. Borrowers with credit scores below 580 will be required to put at least 10% down. Home buyers with higher scores will still be allowed to put down as little as 3.5%. FHA also plans to reduce seller concessions from 6 to 3% of the home’s value.
These policy changes come on the heels of FHA’s announcement in Oct. 2009 that its capital reserve fund had fallen below the congressionally mandated level of 2%. Lawmakers believe these changes will help ensure the agency’s financial soundness and fulfill its mission of serving borrowers not adequately served by the private sector.
Since August 2008 equity lines used as second mortgages and traditional second mortgages have become almost non-existent. Buyers without at least 20% down have turned to FHA financing as their only choice. The upfront costs at closing are high and private mortgage insurance is required. But, a large percentage of buyers are thrilled with this option providing financing to purchase at an optimum time.
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How Does My Credit Score and Report Affect the Loan I Can Take Out?
Where your credit stands is a very important thing to understand when you start the home buying process*. When your credit is run by a lender, they are looking to see how much of a risk lending money to you may be. Many other factors come into that, including your debt-to-income ratio, other investments you have and other financial information, but understanding your credit score and what your credit report says is immensely important.
Your credit score, also known as a FICO score, is extremely important because it directly relates to your credit history and impacts the rate that you receive on your loan. Depending on the lender’s guidelines, where your credit score stands could mean a substantial rate change or fees.
There are three different credit reporting bureaus that give your information to those who check your credit. You’re given one free credit report on yourself each year from their websites to be able to check the health of your credit. Doing this doesn’t show up on your report, but allows you to understand what is being recorded and make sure that all the activity on there is yours and not anyone else who may have stolen your identity. You can get these free reports at the following sites:
www.transunion.com
www.experian.com
www.equifax.com
Checking each at particular times of the year, like one in January, the second in May and the third in September, allows you to keep a keen eye on your report and stop any malicious activity quickly.
What does this mean for your home loan? Well, the information on your report is used to create your FICO score which is affected by things such as how many times your credit has been checked recently, how many credit cards you have, when you have been late on your payments, and late bills from hospitals, utilities and student loans. All of these things affect your score including if you do NOT have any credit … that is, if you’ve avoided credit cards or other bills that many people have. To find out your FICO score you can go to www.myfico.com and for a nominal fee they’ll let you know where you stand.
As an example, your rate today, based on a 740 credit score or above, may be 5.25% and zero points. If, with the same scenario, your credit score was at 720 there would be a ¼ point charge as a fee for your credit score being lower. At a credit score of 700 there is a ¾ point charge, and below 700 there is a 1 point charge. In some cases, if your credit score is below 700 the loan is unable to be processed. (Break points with credit scores are lender-specific; these quotes are based on W.J. Bradley’s current break points.)
A point is equal to 1% of your loan amount. In the scenario above, a $500,000 loan with a credit score of 740 would have no points, a 720 credit score would cost a ¼ point or $1250, a 700 credit score would cost ¾ of a point or $3750 and under 700 would be 1 point, or $5000. When you see how much your credit score can cost you on top of your loan amount, hopefully you see how important it is to keep your scores up!
A few tips for better credit:
- Make your payments on time. Not doing so shows on your credit report and can heavily impact your credit score.
- Watch your usage as your credit score also relates to your credit limit!
-Check your credit often through Transunion, Experian and Equifax to catch problems early and have them resolved. You can receive a free credit report through each site yearly.
-Remember that hospital bills, utilities, school loans and other non-consumer debts can show up on your credit report if they are sent to collections. All of these need to be managed with care.
* W.J. Bradley is not a credit counseling or financial advisement firm and this information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.
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