Credit Help for Real Estate Financing: Five Categories of Your Credit Score

1. Payment History -- 35%

The number of accounts paid as agreed and a good payment history give you a higher score.

Negative points lower credit scores because of 30 days, 60 days, and 90 days late on any debt. The dollar amount of these delinquencies also impacts credit scores. Severity of delinquency, how long past due, and number of delinquencies are nasty remarks on some credit reports. The older these derogatory items are, the less impact they have on credit scores. You do not want any present delinquent accounts when applying for a real estate loan.

Never, ever pay a mortgage payment more than 30 days late. Lenders do not like to see any delinquencies on real estate loans.

Adverse public records, such as bankruptcy, judgments, suits, liens, and wage attachments negatively dominate credit history. Any of these items cleared up helps improve a credit score, unless the item is aged. The older the derogatory entry, the less the impact. Any activity on a particular item makes the item update and therefore, remain on the report for another seven years. So, if a derogatory item is more than four or five years old, don't bother with it.

Collection items unfavorably shape credit payment history. The more age a collection account has, the less its consequence. Most mortgage companies require that collection accounts be cleared before lending. If this is your problem, see "Help with Collections" later in section six.

2. Proportional Amounts Owed -- 30%

The amount owed on a credit line compared to the available credit is termed the proportional amount owed. With a credit card limit of $5,000, the score will be higher if less than $2,500 is owed. Even better is to owe less than 1/3rd of the available credit or less than $1501. To have the highest proportional amounts owed scoring factor, owing less than ten percent of the available balance gives you the best possible rating. On the other hand, owing over $4,500 on an account with a limit of $5,000 lowers your score significantly, especially if you have too many credit cards and other loans with high balances compared to available balances.

Tip: Call your creditor and ask them to raise your available credit as long as you don't use this credit. This raises your proportional amount owed scoring factor.

To raise your credit score dramatically and quickly, pay down as much as possible on each credit line instead of paying off one credit card at a time. If a credit card is totally paid off, it does not compute in the proportional amount owed; therefore your rating does not benefit from paying balances in full. On the contrary, paying balances in full takes the account out of the equation and you don't get higher points for the low proportional amount owed.

3. Length of Credit History -- 15%

Any account over twelve months with a good payment history helps a credit score if the balance is not too high compared to the available credit. Six months is the minimum length of time to establish credit. The time since accounts opened and the time since account activity are factored into the length of credit history.

4. New Credit -- 10%

Whenever you apply for a new credit line, your score receives a negative hit. The more inquiries you generate, the lower your score. Obtaining new credit lowers your credit score. We only apply for credit when applying for mortgages. Every time we get a new mortgage, our credit scores go down.

Never finance a new car or get a new line of credit when you are getting ready to finance property. Wait until after closing to apply for further financing. Be aware that after your new loan shows up on your credit report, your financing abilities shrink. If you need credit funds for any reason, including renovation costs for your new house, apply for this after closing your property purchase.

5. Types of Credit Used -- 10%

The different types of loans taken out by consumers affect credit scores. Credit assessors view mortgage accounts more favorably than consumer finance accounts. Too many installment loans, auto loans, and department store credit cards affect credit negatively. To improve your credit score, pay off installment loans and consumer finance company accounts after you have lowered your proportional amounts owed. Then pay off your department store retail accounts. Keep balances as low as possible on home equity lines of credit because they often count as consumer finance accounts instead of mortgages. Achieve higher credit scores by having only mortgage accounts and a couple of major credit cards with low balances.

Note: In addition to credit scores, lenders consider length of time at residence and employment as well as income and education.

Do You Need a Credit Score of 700?

Don't believe it! We have so many loans; our scores are in the mid 600s, but we buy and sell property all the time. Even with a perfect payment history, we can't get our scores up because we have so many real estate loans with high balances remaining. We often need to get "B" loans instead of "A" loans, which means we pay higher tax-deductible interest, points, and fees.

(c) Copyright 2004, Jeanette J. Fisher. All rights reserved.

Professor Jeanette Fisher, author of Doghouse to Dollhouse for Dollars, Joy to the Home, and other books teaches Real Estate Investing and Design Psychology. For more articles, tips, reports, newsletters, and sales flyer template, see http://www.doghousetodollhouse fordollars.com/pages/5/index.htm

---

New Law Provides Free Annual Credit Report

As of Thursday, December 1, 2004, one-third of Americans will... Read More

Finding the Right Credit Card

There are so many credit cards out there to choose... Read More

Two Things You Need To Know About Prepaid Debit Cards

According to the September 2004 issue of the Nilson Report,... Read More

Credit Card Rates - Negotiating Rates with Your Credit Card Company

Ok, let's face it, everybody hates high credit card rates,... Read More

10 Simple Steps to Manage Your Credit

By far the greatest invention the banks have ever come... Read More

Credit Report ? How Your Credit Score is Determined

Most consumers are aware that they have something known as... Read More

Why Consumers Need a Nationwide Credit Freeze NOW

What do a shoe retailer, an online discount broker, and... Read More

Its Your Credit - Take Care of It!

Thanks to the Fair and Accurate Credit Act, American consumers... Read More

How Businesss Mess Up Their Credit Policies

In "Become the Squeaky Wheel" a book recently published, Michelle... Read More

Credit cards

If gold medals were awarded for marketing consistency, the credit... Read More

10 Ways To Protect Your Financial Identity Being Used For Someone Else?s Shopping Spree

Someone impersonating you could be spending your hard-earned money.Impossible! Not... Read More

Bounced Checks - Straight Talk On Dealing With Bad Checks (NSF)

A check can be considered bad if it is bogus... Read More

How To Prevent Fraudulent Credit Card Transactions

What Are Possible Signs of Fraudulent Transactions see at Web... Read More

Bad Credit Credit Cards

Chances are you've gotten your share of offers like this... Read More

Opting For A Credit Card? Check Out Certain Terms

You've just received a "pre-approved" credit card offer in your... Read More

Why Is It important!

Your credit is the most important thing you have other... Read More

Credit Card Entrapment - The Secrets are Out

Have you ever wondered why your credit card bill is... Read More

Make Sure Your Credit Report Is Correct to Improve Your Interest Rates And Lower Insurance Premiums

Did you know that you could make sure to get... Read More

Getting Your Credit Report and Understanding Whats On It

If you intend to apply for a loan, you need... Read More

Your Guide On Choosing a Credit Card To Suit You

Reach into your wallet or purse, pull out a card,... Read More

Bankruptcy vs. Credit Counseling: What Should I Do?

Credit Counseling and bankruptcy are both ways to relieve the... Read More

What Is A Credit Report?

Even if you have heard of a credit report, you... Read More

Choosing a Credit Counseling Company

If you have considered credit counseling as an option to... Read More

Collection Agencies: What Do They Do?

Collection agencies are businesses that collect past-due bills and accounts... Read More

Why Should You Use Credit Cards

Believe it or not, the way society, especially the commercial... Read More

Understanding the Function of Credit

What is Credit?Credit is the backbone and the engine behind... Read More

Rebuild Your Credit the Right Way the First Time

If you are one of the millions of people out... Read More

Choosing The Credit Card That Is Right For You

Credit cards represent an important part of our financial lives.... Read More

7 Consumer Credit Laws You Should Know if You are Trying to Repair Your Credit

There are seven consumer credit laws you should be aware... Read More

Dont Trade Your Future for Todays DooDads

"Easy Low Down Monthly Payment," "Buy Now Pay Later," "You... Read More

Why Credit Cards are a Bad Idea

Credit cards are just so convenient, aren't they? There's no... Read More

Tired Of Being Broke?...Learn How To Force Banks To Give You Money!

Imagine...obtaining credit that's incredibly easy...opening doors of opportunity you never... Read More

Maximizing Credit Card Rewards

We spend money every single day on many different types... Read More