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Heather Paul's Blog

By Heather Paul | Agent in Santa Monica, CA
  • 7 Tips for Improving Your Credit-Must Have Tips to Improve Your Credit Score for Buying a Home or Property

    Posted Under: General Area in Santa Monica, Home Buying in Santa Monica, In My Neighborhood in Santa Monica, Credit Score in Santa Monica  |  March 29, 2011 11:16 AM  |  567 views  |  No comments

    Here's how to clean up your credit so you get the least-expensive home loan possible.

    Getting the loan that suits your situation at the best possible price and terms makes home buying easier and more affordable. Here are seven ways to boost your credit score so you can do just that.

    1. Know your credit score

    Credit scores range from 300 to 850, and the higher, the better. They're based on whether you've paid personal loans, car loans, credit cards, and other debt in full and on time in the past. You'll need a score of at least 620 to qualify for a home loan and 740 to get the best interest rates and terms.

     You're entitled to a free copy of your credit report annually from each of the major credit-reporting bureaus, Equifax (http://www.equifax.com), Experian (http://www.experian.com), and TransUnion (http://www.transunion.com). Access all three versions of your credit report at www.annualcreditreport.com (http://www.annualcreditreport.com). Review them to ensure the information is accurate.

    2. Correct errors on your credit report

    If you find mistakes on your credit report, write a letter to the credit-reporting agency explaining why you believe there's an error. Send documents that support your case, and ask that the error be corrected or removed. Also write to the company, or debt collector, that reported the incorrect information to dispute the information, and ask to be copied on any materials sent to credit-reporting agencies.

    3. Pay every bill on time

    You may be surprised at the damage even a few late payments will have on your credit score. The easiest way to make a big difference in your credit score without altering your spending habits is to diligently pay all your bills on time. You'll also save money because you'll keep the money you've been spending on late fees. Credit card or mortgage companies probably won't report minor late payments, those less than 30 days overdue, but you'll still have to pay late fees.

    4. Use credit carefully

    Another good way to boost your credit score is to pay your credit card bills in full every month. If you can't do that, pay as much over your required minimum payment as possible to begin whittling away the debt. Stop using your credit cards to keep your balances from increasing, and transfer balances from high-interest credit cards to lower-interest cards.

    5. Take care with the length of your credit

    Credit rating agencies also consider the length of your credit history. If you've had a credit card for a long time and managed it responsibly, that works in your favor. However, opening several new credit cards at once can lower the average age of your accounts, which pushes down your score. Likewise, closing credit card accounts lowers your available credit, so keep credit cards open even if you're not using them.

    6. Don't use all the credit you're offered

    Credit scores are also based on how much credit you use compared with how much you're offered. Using $1,000 of available credit will give you a lower score than having $1,000 of available credit and using $100 of it. Occasionally opening new lines of credit can boost your available credit, which also affects your score positively.

    7. Be patient

    It can take time for your credit score to climb once you've begun working to improve it. Keep at it because the more distance you put between your spotty payment history and your current good payment record, the less damage you'll do to your credit score.


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  • Free Home Finance Tips to Improve and Repair Your Credit Fast

    Posted Under: General Area in Santa Monica, Home Buying in Santa Monica, Tech Tips in Santa Monica, Credit Score in Santa Monica  |  March 29, 2011 11:10 AM  |  1,043 views  |  No comments

    Your credit score affects how much you'll pay for a mortgage or refinance-or even if you can get one at all. Master the six ways to manage home-related spending to keep your credit score braggingly high.  

    How you manage your home ownership finances affects your credit score--and your ability to refinance later.

    1. Postpone that refinance until your credit is squeaky clean

    Even a small blemish on a credit report can cost you at closing. Money expert Denise Winston found that out firsthand: Her husband hadn't paid a $40 pager charge. The unpaid bill was turned over to a collection agency and ended up damaging his credit score.

    Because of that one small unpaid bill, the interest rate on the couple's mortgage was 0.25% higher than if he'd had a clean score. Put another way, that's $13,000 over the life of the loan.

    The lesson? Even small items can damage your financial position. Get your credit report beforehand to see if there's anything damaging. If so, consider postponing a refinance or HELOC  (home equity line of credit) until small but potentially costly dings fade over time.

    2. Pay your mortgage-now

    Not all late payments are created equal: Almost nothing hits your credit score harder than a late mortgage payment. Payment history generally accounts for 35% of your credit score, which is bad enough, but credit score agencies consider late home payments graver than late credit card or car loan payments.

    In fact, credit score agency VantageScore will knock off more than 100 points beyond what it would do for delinquent auto loans or credit cards.

    But if you think you can improve your credit score with early payments, think again. Geoff Williams, co-author of Living Well with Bad Credit, says it may make a slightly positive impression on today's risk-averse lender, but it won't make a big difference in getting future credit.

    3. Cool it on second mortgages and HELOCs

    Drawing down a second mortgage or HELOC can have a negative impact on your credit score because 30% of your credit score is based on how much you owe to creditors. However, if you pay the loan on time, it will have less of an impact, says Winston.

    Also, you can mitigate the credit score damage of a HELOC by staying within 30% of the limit.

    4. Protect your mortgage to protect your insurance rates

    Late payments on your mortgage may also affect your home owners and automobile insurance rates, potentially costing you hundreds of dollars a year, says Williams. Insurers may assume that if you're strapped for cash and pay your bills late, you're more likely to file a claim because you need the money.

    5. Pay your utility bills and property taxes on time

    If you're late on your utility bills and your account is assigned to a collection agency, that agency may report it, causing a drop in your credit score, says Winston. The good news is that utility companies often don't bother to report late bills to credit bureaus until your delinquency becomes serious.

    Interestingly, late payment of property taxes won't affect your credit score unless you find yourself with a lien on your property. Since liens are public records, they may appear on your credit report and might cause a drop in your credit score.

    6. Refinancing? Beware of taking out equity, too

    Refinancing your home generally won't have an impact on your credit score as long as you continue to pay your loan on time, says Williams. However, if you extract equity in the deal, you could marginally affect your credit score because the amount you owe will increase.

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      CHECK OUT THESE GREAT FORECLOSURE AND SHORT SALE DEALS CURRENTLY AVAILABLE

     FIND A LOCAL REAL ESTATE AGENT   

    Heather Paul,Santa Monica Real estate agents,Santa Monica realtors

    Call Me Today for All Your Real Estate Needs!

    Heather Paul, Realtor  (310)586-0364

    “Your Local Real Estate Expert”

        www.HeatherPaulOnline.com  

      

     

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  • How FICO Credit Scores Work-Fast Free Ways to Fix Credit to Buy a Home

    Posted Under: General Area in Los Angeles, Home Buying in Los Angeles, Credit Score in Los Angeles  |  March 27, 2011 11:10 AM  |  856 views  |  3 comments

    How FICO Credit Scores Work

    Buying a house, refinancing it, getting a loan, getting a job--they're all dependent on your FICO credit score. It pays to learn how it's calculated.

    Credit scores seem shrouded in mystery: The agencies that collect the data and create the credit scores jealously guard their systems. Nevertheless, you can manage and even improve your FICO credit score (http://www.myfico.com) -the best-known credit score-by understanding the basics.

    How are FICO credit scores computed?

    FICO uses five broad categories to calculate credit scores, and each category is weighted accordingly:

     Payment History 35% Amounts owed 30% Length of credit history 15% New credit 10% Types of credit in use (is it a "healthy" mix?) 10%

     Why are there three FICO credit scores?

    There are three main bureaus that collect data on your credit history: Equifax, Experian, and TransUnion. FICO takes data from each credit bureau and runs it through its system. This leads to three different FICO credit scores because:

    Each agency may have information one or both of the others don't have. For example, a collection agency may have reported a bad debt to only one of them.
    Errors that occur just in one agency's data may affect that agency's results, but not the results from the other two.

    And to make it even more complex, many lenders augment their credit decisions by adding particular criteria they want to consider.

    Also, although FICO is the best-known credit score, there are many others. Some lenders generate their own credit scores using data from the same three credit bureaus. Experian, in fact, has developed its own scoring system separate from FICO.

    However, FICO remains the most common; when big lenders refer to your credit scores, they're usually referring to the FICO scores.

    Why can a credit check by itself reduce a FICO credit score?

    FICO's research shows that more credit shopping, resulting in more inquiries, correlates with a higher risk of future default. However, multiple queries in a short period for one purpose-such as when you're shopping for a HELOC-would count as only one inquiry.


    The FICO score ignores any mortgage, student loan, or auto loan inquiries made within the previous 30 days. The system limits itself to inquiries made in the 11 months before that, and reduces similar inquires within any 45-day window to a single inquiry. For example, if you approach five banks over two weeks on a HELOC, it will only count as one inquiry.

    The inquiry formulas can get rather complex; the FICO site (http://www.myfico.com/CreditEducation/CreditInquiries.aspx) has more details.

    How long does major negative information stay on my credit report?

    Generally, the impact of adverse information on a FICO score lessens over time.

     Foreclosures 7 years, with rebound beginning in as little as 2 years. Deeds in lieu and short sales 7 years-they usually appear on credit reports as foreclosures. Late payments 7 years. It doesn't matter what the late payments are for. Recent late payments hit your credit score harder than older ones, and the amount and frequency of the late payments are also factors. Bankruptcies 7 years (10 years for "full discharge of debt"-i.e., if you're absolved of your full debt, the bankruptcy stays on your credit report for 10 years). Because they often involve more than one account, bankruptcies generally have a greater negative impact on your credit score compared with a foreclosure, short sale, or deed in lieu.

     How does loan modification affect my FICO credit score?

    Until November 2009, if you were in a loan modification program, your credit report likely notes that you have made only a partial payment. This significantly lowered your FICO score.

    However, in modifications made since November 2009, the credit reporting system was changed to reduce the credit score hit. But as of October 2010 FICO hadn't completely bought into this system and may at some point decide that everyone in a loan modification program, whether under new or old rules, deserves a significantly lower score.

    For now, your best bet is to obtain your free credit reports, as noted later in this article, and see how your particular situation was reported and handled.

    Do reductions in credit card or HELOC limits affect my credit score? 

     The impact will be unique for each consumer. The FICO formula considers many aspects of your balances and behaviors, including whether you have a high percentage of available credit at the time the report was pulled.

    For example, if you have high debt and use a substantial proportion of your available credit, you're at a greater risk. Opening a new credit card to increase available credit, after another card was reduced, may backfire and reduce your credit score.

    Do lenders have to tell me if they're basing a quote on my bad credit score?

    New regulations taking effect in 2011 require lenders to tell you if they're giving you a particularly high interest rate or other less favorable loan term than other borrowers who qualify for the best deals. In the past, the lenders may not have told you that you were getting an especially high rate-you were penalized without knowing it.

    Starting in January, you'll be forewarned.

    Then if your credit score is lower than you expected, you can investigate it-maybe it's just an outdated report or a simple mix-up. At least you'll know the deal before signing on the dotted line.

    But don't wait until you apply for a loan to discover your credit is a mess. By law, you can get a free report from each agency once a year at Annualcreditreport.com (http://www.annualcreditreport.com). (And no, this isn't the company advertising with the slacker band on TV.) This is the only site authorized by the Federal Trade Commission to provide free reports.

    However, these reports don't include your FICO scores. You can purchase TransUnion and Equifax FICO scores from MyFico.com for $15.95 each. (Experian continues to provide a FICO score to lenders but no longer sells its score on a retail basis.) Some consumers will qualify for free FICO scores starting in mid-2011 or early 2012.

    If you need a loan officer to assist you in improving your credit to buy a home or property, feel free to contact me anytime.

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    Call Me Today for All Your Real Estate Needs!

    Heather Paul, Realtor (310)586-0364

    Your Local Real Estate Expert

     www.HeatherPaulOnline.com

 
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