I am planning on buying a home this year to close by 11/30 and I have a financing question.

Asked by InCali, California Fri Feb 13, 2009

I would like to know what is on my credit report so I can clean it up if necessary to boost my score. I want to pull my own reports so it doesn't lower my score since I am not within 45 days of closing. So what I want to know is which reports matter and do lenders use the FICO score still or do they take into coniseration the PLUS and other score that the other bureaus offer? I don't get the free credit report because I got mine 11 months ago so I need to pay for it. Should I go with a consolidated service like Myfico offers or should I buy my report at each bureau?

Thanks for your help.

By the way, I am needing referrals for a good, consultative broker that can walk me through the steps of a loan this year - I'm interested in FHA so they need to offer that product.

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Steven Ornel…, Agent, Fremont, CA
Fri Feb 13, 2009
Hi InCali,

Very smart move to be thinking about this upfront. I think you will find the following document very useful in your effort to maximize your score before having it pulled:

FICO is still the primary credit scoring metric. Since you are only a month away, I might just wait and get your free credit account information via https://www.annualcreditreport.com/cra/index.jsp

Tony is correct, FHA is less about credit score and more about ability to pay and “Letter of Explanation” concerning any credit report “blemishes.” However, FHA Mortgage Iunsurance was FICO-based up until the Housing and Economic Recovery Act of 2008 set a one-year moratorium on the implementation of the FHA’s new risk-based premiums tied to FICO. Current MI fixed rates are found here:

When it comes time I would actually use a mortgage broker to pull your "tri-merge" credit report [Equifax, Experian (formerly TRW), TransUnion] as I'm sure they will be more than willing to advise you on how to improve your score if there are issues. The 2-5 point hit is minimal compared to the advice you will receive on how to improve score. Also, myFico charges $48 for the tri-merge, you should pay no more than $20 with the broker. FYI, your middle score is typically used for qualifying.

You might also want to review this post I made earlier this week that talks about the benefits of FHA loans:

If you are looking for "straight-talk" regarding FHA loans consider me a trusted source. Although I am a Mortgage Broker and Realtor certified in FHA financing, I do not personally provide FHA financing services (Federal rules prohibit W2 FHA loan agents from deriving income from non-loan Real Estate activities). So, my comments will be completely neutral. I also have two rockin' FHA referrals if needed (please shoot me an email offline if interested).

Best Regards, Steve
0 votes
Jim Walker, Agent, Carmichael, CA
Fri Feb 13, 2009
I used "Privacy Assist" from Bank of America. They will give you a full CR with Fico and Beacon scores from 3 bureaus..TRW, EQ and and TU
I have seen thousands of CRs over the last 35 years and theirs is very thourough. - It is a 30 day free trial. so you have to remember to cancel before the 30 days is up or you will pay their monthly fee, which is like $12.95 - they tell me that it does not affect the score.
Lender still use scores, they also look at ability to repay, and the marketebility of the collateral.
In the old days we called it the 3 C's: Character, Capacity, and Collateral.
1 vote
Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Fri Feb 13, 2009
Congratulations on being proactive
FHA is not credit score driven so you dont need to worry about your scores as much as the information contained on your report. If you have any outstanding collection accounts you may want to pay them off. If you have any late payments in the last 12-24 months, be prepared to provide a written explanation. Ditto for any bankruptcies or foreclosures in the past.

As long as you pay your bills on time you should have no problem getting an FHA loan for however much you qualify for based on your income.

Erin was right though, you should at least speak to a reputable lender now and they can provide you with a free copy of your credit report. Speak to your bank or credit union, or get a referal from a friend

Good luck
1 vote
Erin, , South Lake Tahoe, CA
Fri Feb 13, 2009
freecreditreport.com will get you your credit report but does not tell you your credit score which also a key piece of information. Yes, lenders usually use the combined credit score from all of the three reporting agencies. You should get yourself aligned with a lender now so that they can help advise you on things you can do now to improve your credit score for November. They usually do this for free.

I'm not sure where you are interested in buying, so I can't refer you to a broker. Do you want to use a portfolio lender or a broker?
Web Reference:  http://SoldByErin.net
1 vote
Sue Archer R…, Agent, Palm Harbor, FL
Fri Feb 13, 2009
Each time you run your credit it will affect your score from 2-5 points. That will be recovered by the time you're looking at buying a home. Nevertheless. pull your credit report from all three reporting agencies.

FICO is still used but not as stringently as it used to be. (propgrams used to be offered for scores at 580, 600, 625, 650, 680....not quite as specific now) I believe every loan broker I know works with FHA because that's the majority of the market.

Things that will help you improve your credit score- having credit balances on your revolving credit under 30% of your credit limit, no late payments on any reported debts, no collection accounts....I can get your credit report run for you for free from some of the lenders that I work with. The reason that they will provide it to you for free, is that they want to build a relationship with you. It takes time to make the improvements that you plan, and then when you find a home you want, the seller may require you to have a prequalification by their specific bank. They would like to work with you through the buying process.

Other parts of your plan should be in saving for the downpayment, understanding the tax implications of home ownership, as well as other considerations for home ownership. It's going to be exciting!

A good referral is Mark Holmes at American Pacific Mortgage (916) 837-4360.

Web Reference: http://www.suearcher.com
Web Reference:  http://www.suearcher.com
1 vote
Isaac Bensus…, , 92037
Sat Feb 14, 2009
InCali, You have received excellent answers from the panel. I have been in Real Estate for many years and I was able to learn from all the responses. Steve Ornellas connects you to an array of very important information. Good luck in your search for a home.
0 votes
Robert Chome…, , San Diego, CA
Sat Feb 14, 2009
I would go with the 3 bureau (Experian, Equifax, Trans Union) report offered by any of the bureaus. The lender will go with the middle score (throw our the high and low).

Then find a good lender to work with and fax them this report. Then they can sit down with you and go through it and counsel you on what you need to do to improve your score or if you qualify as it right now. Loan Officers are looking at dozens of credit reports every week and we'll know exactly where you stand and what you can do to improve.
0 votes
Erin Newingt…, Agent, Elk Grove, CA
Fri Feb 13, 2009
It is great that you are thinking ahead!

I personally would not worry about getting your credit pulled ---once--- by a mortgage professional. It takes several pulls on your credit in order to affect your score. As long as you work with someone you trust, and your credit is pulled once, you will be just fine.

All Banks that we work with will look at your FICO scores. As I am sure you know, there are 3 credit bureaus that will provide you a score. So Bank’s will usually use the one right in the middle to determine if you will qualify for your mortgage.

I appreciate that you want to do the research ahead of time to try and prepare yourself for homeownership. But, I would encourage you to talk with a mortgage professional that can give you some pointers. That is what we get paid for!

When I work with Clients with credit issues, I run their credit through a software program I have that will show us exactly what the client should do in order to improve their score. Many times just the slightest changes can make the biggest differences.

Here are some general guidelines on how your credit score is determined:

35% of your score is determined by your payment history.
Did you pay your bills on time and are you current on all of your trade lines (accounts)?

30% of your score is based on the amount of money you owe vs. your available credit.
Keeping your credit cards balances and other loan balances around 50% of the available credit is a good way of improving your score.

15% of your FICO score comes from the length of your credit history.
Keep in mind that even if you no longer use a credit card for example.. Still keep the account open so that you can keep the account history.

10% of your FICO is based on your overall mix of your credit.
This means how many types of credit do you have (car loans, credit cards. or mortgages). The more types of loans you've have, the better, being too heavy in the credit card area could hurt you. This does not mean that you should run out and buy a car though!

10% of your FICO score is based on new credit that has been setup in that last 12 months.
Opening new accounts can hurt you, so keep that in mind this year.

That should get you started.. But I would still think about talking to a local mortgage professional for more detailed advice.

There is more to qualifying for a loan than your credit! If you are planning to buy in the next 12 months. It would make sense for someone to go over your entire scenario. This way if other changes are needed, you will know to work on them as well!

Give me a call if you have any further questions!

Good luck!
0 votes
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