True Cost of Low Credit Scores on a Mortgage

Have you ever considered the cost of damaged or 'bruised' credit?

Missing a payment can't be that big of a deal can it?

Well, take a look at this breakdown of 4 different tiers of credit scores used by Fannie Mae and Freddie Mac to risk base price mortgage loans.

Over the first 10 years of the loan, the differences are staggering and can cost up to $16,000 or more on a $175,000 purchase of a home. Look at the difference between a 699 FICO score and a 700 FICO score.

There has never been a time when credit scoring is more important than it is today in the current state of the credit markets.

Do yourself a favor, get well versed on what actions affect your credit scores. Take care to protect your credit. It is so important and could potentially save you thousands of dollars.

True Cost of Low Credit Scores on a Mortgage

Have you ever considered the cost of damaged or 'bruised' credit?

Missing a payment can't be that big of a deal can it?

Well, take a look at this breakdown of 4 different tiers of credit scores used by Fannie Mae and Freddie Mac to risk base price mortgage loans.

Over the first 10 years of the loan, the differences are staggering and can cost up to $16,000 or more on a $175,000 purchase of a home. Look at the difference between a 699 FICO score and a 700 FICO score.

There has never been a time when credit scoring is more important than it is today in the current state of the credit markets.

Do yourself a favor, get well versed on what actions affect your credit scores. Take care to protect your credit. It is so important and could potentially save you thousands of dollars.

Economic Stimulus & Refi Plus

Refinancing a home these days has been a more difficult task than what we've seen over the last several years when homes were treated much like an ATM machine.

The challenges we are seeing lately are tighter underwriting guidelines which go back to more sound lending practices. Lenders are tightening the credit score requirements to a 620 FICO or better and in many cases as high as 640 before they will lend. If you are not sure what your credit score is, check out your score at Equifax.com.

Another big problem we've seen is house values falling. Although we are seeing a stabilization started to take hold, house values in many cases are now less than what the mortgage balances are. In other cases, the values have fallen and left very little equity in the homes. Homeowners want to take advantage of lower interest rates, but have been unable to do so up until now.

Under the Stimulus package, Fannie Mae brought about a new program called Refi Plus. This new program is allowing homeowners, who have demonstrated "good pay histories on their mortgages but have been unable to refinance due to a decline in home values", take advantage of the lower rates.

The program is brand new and slated to roll out on April 6th. There are still many questions we are working through with the lenders, however, opportunity is right around the corner so they say.

This program is NOT a "BAIL OUT" for people who's values are upside down or for individuals who may be facing foreclosure.

More to come.

Can I buy a Home if I went through Foreclosure?

What an amazing Question!

ABQOLUTELY Yes!

Did you know that FHA requires only 3 years since a foreclosure was fully discharged before they will consider a new home loan? That's right! Only 3 years!

Here's the deal though. This is not a blanket guarantee that someone who faced foreclosure 3 years ago will qualify. There needs to be evidence of improved credit since the foreclosure.

The main problem I see with many clients who face this situation is that they haven't done anything to remedy or repair their credit since. In fact, many of the clients I've counseled have numerous other collection accounts, judgements, or late payments since the foreclosure occurred.

If this describes your personal situation, but you want to buy a new home, perhaps it is time to sit down with someone who can counsel you in cleaning up your credit as well as teaching you how to keep it clean for the future.

As we've already seen, damaged credit can cost thousands of dollars in unnecessary interest or insurance premiums over time on future purchases.

Feel free to visit the Credit Repair link on the right side of my blog here for an affordable credit repair service.

Credit Monitoring Services and You

Did you know that on any given day your credit profile may change? That's right sports fans!

A credit report is only a snapshot of credit performance at any given time. That's why it is extremely important to be proactive in monitoring your credit. This may help you improve and/or maintain your good credit standing. Believe it or not, this may come as a shock to you, but the credit report is an integral part of managing your overall credit standing. If you would like to improve or maintain your credit rating, here are a few positive steps you can take....

1. make all the effort you can to resolve any past due account
Resolving past due accounts does not necessarily mean you have to pay off balances. It is simply a matter of of contacting the creditor and working out a manageable payment plan. As you make these payments, your credit rating can improve as the credit reflects a good payment history of your new plan.

2. reduce the number of accounts with open credit
Trying to manage a multiple accounts can become quite cumbersome. To keep your records easier to manage, close down a few accounts. This may help with making payments on time in the future.

3. not so common, but a lack of credit history may be a factor
Creditors gauge a borrower's credit worthiness through a history of payments made. If you've not taken out any loans or credit accounts, this can affect a creditor's willingness to take a chance on your limited history. You may need to start with some small credit accounts to establish a history of good payment history. Perhaps this is a secured loan or credit card through the bank or a small installment loan.

4. taking action on any items is crucial, but don't expect to reestablish good credit overnight
Most types of adverse credit will remain on the credit profile for up to 7 years and in some cases as long as 10 years. Remember, the credit problem may have happened suddenly, but creditors are looking for patterns of responsible credit use over time in making their decision to extend credit.

With Identity Theft increasing year after year, monitoring your credit has never been more important than it is today. In fact Identity Theft is the fastest growing crime in America. Most companies will charge a nominal monthly fee to monitor your credit. They will send you a copy of your file quarterly or monthly as well as notify you any time a change occurs in your credit profile. If fraud does occur, most monitoring services provide you with a kit to help settle any problems that may arise. They will also have a counselor you can call to talk with for guidance. Some services actually provide all of the cleanup for your rather than giving out a kit. You sign an affidavit and power of attorney, and they handle the rest for you.

Having personally experienced identity theft twice, I recommend the 2nd choice. One place you can visit for this is Identity Theft Shield. They are owned by Kroll Background services. Many times a home owners policy also has a provision to protect for Identity theft. However, be aware that any claims can cause your home owners policy premium to increase. They also provide kits to guide in self-help with the clean up.

Credit is a serious matter and could mean savings of thousands of dollars if monitored closely and carefully. For any questions, please feel free to call me at 505-250-1944 or send me an email at jchristensen2901@gmail.com.

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It Isn't Fair Pt. 2

Last week we discussed some of the issues and rights under the Fair Credit Reporting Act. Now, we can continue the discussion.

Below is an expert from a little booklet called Making the Most of Your Credit Report: Your personal guide. This booklet is put out by Kroll Background America, Inc. who is the largest backround investigation company in America. They also are one of the leading credit repositories used in providing Tri-merge credit reports for mortgage lenders, credit card companies and auto lenders.

It is critical in understanding our credit, what our rights are regarding the reporting of our credit history. Please take the time to review this information to gain more understanding as you learn to manage your credit more efficiently.

Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information. Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. Keep in mind that any verified information the consumer reporting agency verifies as correct may continue to be reported.

Consumer reporting agencies may not report outdated negative information. In most cases, 7 years is the maximum amount of time for consumer credit tradelines. Some Bankruptcies may continue on the report for up to 10 years.

Access to your file is limited. A consumer reporting agency may provide information about you only to people who have a valid need. These needs include applications with creditors, insurance requests, landlords or other business. Under the FCRA, verification of the specific need is required for access.

You must give your consent for reports to be provided to employers. A consumer reporting agency is restricted from giving out any information about you to an employer or potential employer without written consent from you. The trucking industry is generally exempt from written consent. For more information, go to http://www.ftc.gov/credit.

You may limit "prescreened" offers of credit and insurance you get based on information in your credit report. Unsolicited "prescreened" offers for credit and insurance must include a toll-free phone number you can call if you choose to remove your name and address from the lists these offers are based on. You may opt out with the nationwide credit bureaus at 1-888-5 Optout (1-888-567-8688).

You may seek damages from violators. If a consumer reporting agency, or, in some cases, a user of consumer reports or a furnisher of information to a consumer reporting agency violates the FCRA, you may be able to sue in state or federal court.

Identity theft victims and active duty military personnel have additional rights. For more information, visit http://ftc.gov/credit.

There is a lot to know about understanding your rights under the Fair Credit Reporting Act. However, you should never feel overwhelmed if you have a trusted advisor you work with who knows the information or can access it very easily.

If you would like to discuss this more, you're more than welcome to contact me at jchristensen@legacymortgagenm.com.

Shopping? Protect Your Identity

Well the holiday shopping season is upon us once again. This is the time of year when we are thinking about the people we love most. What in the world are we going to get for each of them. Some are easy and some are so incredibly hard to shop for. Don't worry, there is still plenty of time and plenty of ways to get your shopping done.

Please keep in mind that this is also the time of year when Identity Thieves are out looking for their latest victims. While you're out doing your shopping this year, please keep in mind some very simple things to protect yourself and your identity.

1. Your Trash is NOT Garbage... To these ID thieves, trash is a treasure chest of vital information that many unsuspecting people throw away. Be careful to shred your unwanted mail and solicitations that may have your vital information like social security numbers, birthdays, name spelling, address, and phone numbers. It doesn't take much for an ID thief to become a new person. Treat your Trash like a Treasure and this will thwart many thieves. To opt out of receiving pre-screened offers of credit in the mail, call 1-888-5-OPT-OUT (1-888-567-8688). You will be asked to provide your Social Security Number, which the consumer reporting companies need to match you with your file.

2. Mail outgoing bills and parcels in Post Office collection boxes...make sure to remove your mail from your mail box promptly so thieves don't riffle through looking for a new ID. If you're planning on being away during the Holidays, contact the Postal Service at 1-800-275-8777 or online at http://www.usps.gov to request a vacation hold. The Post Office will hold your mail at the local office until you can pick it up or are home to receive it.

3. Be on guard using the Internet to do your shopping...Every year, more and more people are using the internet for their Holiday shopping to avoid the crowds at the malls and to save themselves time. The internet also never closes, so shop til you drop in your PJ's if that's your joy. However, be aware of the scammers and ID thieves lurking on the net. For some practical tips to protect your personal information, visit http://www.OnGuardOnlinve.gov.

4. Be aware while at the Register...While you are out shopping, more and more of the stores now allow a quick swipe of credit and debit cards at the register. Be aware of wandering eyes that may be watching for a PIN entry. Also, keep alert to cashiers who may be acting funny as they process your transaction. If you suspect any kind of strange activity, report it immediately to the store manager.

5. Protect your wallet and purses...Many of us carry large wallets and purses with us while out shopping. In those wallets and purses are the very items many thieves are looking for. Consider leaving the wallet or purse in the car or at home when entering a store. Secure only the cash, ID, and/or credit card in your pocket while shopping to make it more difficult for a thief to swipe your entire ID vessel of choice.

6. Identity Theft Insurance...ID Theft Insurance will not deter a thief, however, it can in many circumstances minimize any loss associated with ID Theft. Things to consider when looking into ID Theft Insurance are 1) the amount of coverage the policy provides, 2) whether it covers lost wages, 3) the amount of deductible, if any, 4) any exclusions to the policy (is the thief a family member), 5) does the policy provide a counselor to help resolve the problems of id theft, and 6) Does your homeowner's policy already contain some provision for ID Theft (if so, how much will your premiums be affected if used. The biggest "cost" of ID theft is the time you will spend cleaning up your credit and recovering your identity.

Personally, I spent 4.5 years cleaning up my credit and my wife's credit after a box of checks was stolen from our home in 1998. It nearly cost us approval on our first home. 36 checks, 135 collection accounts, $39.95 for credit reports every 4 months for 4.5 years, and a day in court to convict the thief later we got it all cleaned up.

Consider an Identity Theft protection like Identity Theft Shield, which will do all the work for you when a theft occurs. I wish I had this when I went through the mess. For only $12.95 per month, they take the worry out of clean up. http://www.prepaidlegal.com/hub/christensenj

Have a safe Holiday Season!