Have you seen your credit report lately?

Were you aware that very few reports are accurate?

Were you aware that you now have a Credit SCORE?

An erroneous credit report can have a dramatic impact upon the ease with which you secure a mortgage and can directly affect the interest rate you receive.

When it comes to credit, it is not what's real but what is reported!

THIS MEANS YOU NEED TO CHECK AND CORRECT YOUR CREDIT REPORT BEFORE YOU EVER BEGIN LOOKING FOR A HOME!

It doesn't seem fair, but in this litigious society and with the constant scrutiny over discrimination there has to be a common guideline, or equalizer, that cuts across all levels & applies to everyone which regulators can point a finger to and say "This person was turned down because . . ."

The basic concept is good, but the problem is that the credit reporting system isn't perfect. Unfortunately, there is no legally mandated format that all creditors must use when reporting - as a matter of fact, there is no requirement for creditors to report your credit at all!

As I've mentioned before, the better you know the rules to a game the better you can play that game and the more likely you are to win. So let's see what some of the mortgage rules are from an underwriter's point of view and then examine how these apply to the credit reporting system.

You've become accustomed to looking at past performance in sports. The favored football team of the week, a horse's handicap at the race track, etc. are all determined by looking at the statistics of their past performances. Which is basically all a credit report is - your payment statistics!

As you will see in Underwriting Guidelines late payments are more of an issue and a money loser than a foreclosure so it is understandable that Underwriters would be especially sensitive about the potential for late payments.

The reason that looking at credit reports is a good predictor of how you will handle your debts is that, unless there is a significant change in circumstances, people don't suddenly change their reaction patterns overnight.

In other words, if someone isn't concerned about getting their credit card payments in no later than the due date or if they regularly pay their rent/mortgage 15-30 days late what do you think the odds are that, absent winning the lottery, they will pay their new mortgage any differently?

Fortunately, credit is only ONE of many approval criteria, but if you are weak in one area you'd better be strong in all the others!

Unfortunately, an acceptable credit score is many times your ticket for admission. If you don't have at least an XXX credit score (the score is dependent upon the loan type) many times an underwriter is not even allowed to look at the rest of your file. So, many times, credit can become THE major issue.

Department stores & preliminary mortgage reports access a type of report that is limited to a certain response time from the credit bureau (for speed) so at peak times they get less information and the report is less accurate.

An Underwriter must use a CPU to CPU pull which furnishes the maximum amount of information so therefore you need to be sure that is the type of report the mortgage company uses from the very beginning. Otherwise there is the potential for last minute surprises because the final credit report will differ from the original.

There are also many different formats used to print the credit data. The simplest is a report that includes the raw data from only one repository. Alternatively, the data from all three could be merged onto one report which is easier to read. To go even further this report could be "de-duped" (all of the duplicates removed) and obvious erroneous information could be removed (unfortunately it is only removed from the report you hold in your hands, not from the credit bureaus). Unfortunately this destroys the evidence of why your credit scores are too low and does not allow anyone to help you get your scores corrected.

We pull all three, CPU to CPU, 3 single repository, raw data print outs because of something called Credit Scoring. Credit scores take into consideration all of the duplicated and erroneous information that may not show up on the sanitized, de-duped report. This means that many times the credit scores don't seem to make sense on the sanitized quickie report because a lot of the data is missing. MORE IMPORTANTLY we can't help you get things corrected and your scores raised if we don't know a problem exists!

Once we had a man who had been turned down for loans at 2 mortgage companies because of low credit scores. When we pulled a raw report we saw that ONE student loan had been reported 14 times. On the sanitized reports the student loan only showed up ONE time, BUT the computerized credit scoring mechanism counted 14 times the actual debt.

Unfortunately the student loan also had 1-30 day late so the scoring mechanism also counted 14 times the derogatory credit. By simply correcting this one account we saw an over 100 point rise in credit scores and we were able to get him a very good loan.

This is why we pull the raw reports so that we can see all the duplications and misteaks. This usually allows us to find the genesis of the errors and allows us to help you raise your scores to your maximum levels.

The bureaus could not let unauthorized people look at your credit, but they could sort the reports and give names of the people who met a lender's profile. (This is where all those unsolicited "pre approved" credit cards come from.) Credit scores simply standardized common list profiles. Credit scores are generally known as FICO™ scores after the company that calculates the scores for Experian just as you say you want a Kleenex™ when you want a tissue.

The problem with this system is that people who pay their bills off monthly and are frugal with their credit have lower scores than credit abusers UNFROTUNATELY people who pay cash simply didn't exist. The credit scoring system has been massaged and improved over the years, but credit scores are still the number one complaint mortgage companies have about the approval process.

Credit scores do not take into consideration stability factors. They do not know your debt/income ratio. They don't know about raises or the divorce, but if you want a standard Conforming (FNMA/FHLMC) fixed rate loan you must have at least a 620 score for an underwriter to even consider your loan request. If you have lower than a 620 score there is alternative financing available, but usually at "alternative" rates!

Practically the majority of scores fall between 520-680. I have never seen a score higher than 835 and I have the unique distinction of having the lowest score ever recorded in the U.S. Erroneous information drove my scores down to 135. In less than 2 weeks I was able to raise my score by over 600 points (to over 750) by simply correcting the mistakes.

It is very important that you have as high a score as you deserve. An artificially low score, even if your score is above 620, can impact how carefully an underwriter scrutinizes your situation as well as the loan types available and the interest rate you can secure.

<580 = "B" loan (if they are available at all)

600+ = A minus or FHA loans

620 = higher interest rate (2 points)

680 = 95% slightly lower rate

700 = 95% financing at the cheapest rate

720 = 97% financing + no income and no asset verification loans

721-800+ = whatever loan you want at the lowest rates available.

I would find no fault with that system IF the credit scores were accurate. After all, why should a person who never pays their bills on time and has no savings get as low a downpayment and interest rate as someone who has never been late and is a good manager of their debts and money?

An underwriter will look at at least 2 of these repositories.

There is no standard that tells the underwriters which repositories they must use. They use whichever they feel gives them the most accurate determination of the borrower's history and abilities so you must be prepared by viewing and correcting all three.

Theoretically all three bureaus could/should all have the same data, but that is seldom the case.

Remember there is no standard for data reporting and many creditors only report to one or two of the bureaus. Many times the same creditor reports your credit 2 or 3 different ways. Let me give you a couple of real life common occurrences:

 

There is one major Department store that consistently reports good credit on one bureau, but reports 1 X 30 on another bureau and 1X60 on the third bureau. They say it is the bureau's fault, but because of the consistency the misteak the information can only have come from the Department store reports.

A large, local Credit Union also reports your loans several different ways. They will include the collateral or your name in the account number (CHEV12345) but also report the account as loan number 123456789, or 123456CAR, MARY123456, etc.  Which means it can be on your credit report multiple times.

One major Car financier has a bug in their system that will report you late if your payment is received anytime during the following month. But that means if your payment is due on the 25-31st, unless you mail your check very early, all, or most of your payments, will be received in the following month and be reported as 30 day lates. We had one man who had 36 x 30 day lates out of a possible 36 because his payment was due on the last day of the month.

As you can see errors can pop up or compound themselves very easily and without your knowledge.

You think you have excellent credit because you pay everything on time, but too late you find out the credit bureau gives people another impression entirely.

This is a point worth repeating, most credit reports are inaccurate!

At FINANCIER$ we will counsel with you to explain the problems and help you get the loan you deserve. Unfortunately most other mortgage companies aren't set up to take this extra time to help with counseling and credit corrections. WE ARE, but we must start early since some corrections can take from 6 weeks to 3 months.

There is one more reason your lender of choice should be a FINANCIER$. We have access to a Rapid Correction procedure that can get your credit reports corrected in as little as 72 hours AFTER you have furnished the supporting documentation.

FINANCIER$ strives for excellence. We will help you get your credit reports made accurate! Mention the website and get a $20 discount on the cost of pulling all 3 credit bureaus. (see it was worth reading this far!))