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Credit Clean-up Program

A good credit history is important to obtaining a great home loan rate.  Below are some ways to help you walk through the process of improving your credit history.

Although each file scored has its unique aspects some general rules for raising scores are as follows:
 
• Do not close your credit cards -- especially ones you have had for years. Always keep your oldest cards open and active because the scoring model loves to see long histories and considers you less of a credit risk.
• If you have too many credit cards for the age of your file then close the cards you have just opened in the past 2 years. Remember to leave your oldest cards open even if is a higher interest rate. Negotiate with those creditors to lower your rate or you will transfer the balances.
• Know what your credit limit is on each card and try to keep your balances below 30% of the credit limit. Transfer balances from accounts where you are higher than 30% to other cards in order to spread out your debt over a few cards keeping all balances under the 30% ratio. You can raise credit limits to accomplish the same thing but make sure your credit limit is being reported to the bureaus or you might be unfairly judged by the scoring model. Without a credit limit being reported like with Capital One’s company policy, you are judged using your current balance against what is the most you have ever used on the card. This usually rates you as near maxed out when you are not. (Capital One is reconsidering their credit bureau reporting policy and will make a possible change in 2008.)
• Bring any accounts that are currently past due to current by paying the past due amounts. Paying collection accounts rarely raises your score because you are penalized for having an account that went to collections not for how much you owe on it. The older the account is the less impact it has so if you are considering paying old accounts off make sure you can’t get more bang for your buck by reducing other balances such on credit cards instead. If you can negotiate with a collection company to have the collection removed from your credit file if you pay it then this is a good thing. Just be aware and get it in writing that they will remove not just update to “paid collection” on your bureau file.
• A common mistake is paying off your auto or installment loan just because you can. Unfortunately, this usually lowers your score so leave your installment loans alone and concentrate on revolving balances and past due amounts.
• Authorized User accounts that are reporting derogatory information are real killers, you don’t have any financial responsibility but you are being judged by the card holder’s payment history. Get your name off the card if the history is impacting your score negatively.
• The current policy of including “Authorized User” accounts in the scoring model is going to change late this year and into next at all three bureaus. Fair Isaac, the developers of the FICO score that your lenders use, has announced that they are taking steps to protect the integrity of their scoring model. There has been a rise in new Internet based companies that are selling authorized user accounts to consumers with the intent to impact their FICO score. This ability to dramatically alter ones score using another person’s pay history has caused concern among those who question the validity of the score to represent a consumer’s actual credit file. The FICO scoring model at each bureau will be making the change in the near future to no longer include the “Authorized User” account information in determining the credit score. The trade line however will continue to display as part of the consumers file. The exact dates the bureaus will be making this change have not been announced.

 

Even if you have a less-than-perfect credit history “Your Home Sweet Loans Specialist” can still find home financing to fit your needs. Take a step in the right direction today by contacting Home Sweet Loans.
 
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