Monday, March 8, 2010

Closing Your Accounts

When you have too many accounts that are open it can affect your credit negatively. With the current credit models too much credit can be a warning sign to your creditor that you are just getting by. Your credit can be hit even worse if your balances on your revolving credit are too high or if you have opened any new credit.

So how do you raise your scores in this type of situation?

The answer is: very slowly. Closing out a bunch of credit cards at once can drop your scores tremendously. You are better off paying your cards off and leaving them open but if you are the type of person that are too tempted to use the credit card again then you need to close your cards out over time. Close out your accounts over time by closing each one every month or two. Also, remember that you still need some credit to have credit scores so don’t close everything out. Leave a couple credit cards open so you don’t end up without any credit at all.

Tuesday, March 2, 2010

Credit Tip of the week

Credit Card Changes

Two of the Credit CARD Act changes are already in place.

Consumers now have 21 days to send their payments in instead of 14 days and credit card companies must give consumers 45 days notice if their terms change, instead of 15 days.
Although it is noted that one important exception to the 45-day notification rule is if your credit card company decides to reduce your credit limit – the company can do that without any warning.

Should they lower your limit, call the company and ask for it to be reversed. If the credit card company refuses, then pay any remaining balance as soon as possible since lowering your credit limit could affect your credit score. Remember that it is ideal to keep your credit balance to credit limit below 40% or it will affect your credit negatively which in turn can lower your credit score enough to affect your rates on insurance, mortgages, and many other items.

Monday, February 1, 2010

Credit Tip of the week

Credit Tip of the Week:

Under the Fair Credit Reporting Act (FCRA), the Consumer Credit Reporting Companies are permitted to include your name on lists used by creditors or insurers to make firm offers of credit or insurance that are not initiated by you ("Firm Offers"). In other words when you personally or one of your clients applies for a mortgage and credit gets pulled your information gets sold.

The idea behind this was to allow for consumers to receive offers from other mortgage companies and insurance companies when you are looking at obtaining financing for a home. What has happened though is banks/brokers buy your information from 3 major credit reporting agencies and then use deceptive practices to lure your client away. Some of those practices include calling the client pretending to be the original loan officer, sending out applications with teaser rates to try and bait and switch potential clients.

Under the FCRA their www.optoutprescreen was created to allow consumers to opt out of their information being sold. You can go to the website before your credit is pulled or after and opt out for the next 5 years or write a letter and opt out for life. This is a great option to avoid having your information sold to somebody you don’t even know.

Monday, January 25, 2010

Recent FHA Changes

With the high amount of defaults FHA is experiencing through foreclosed homes and short sales, FHA has decided to follow the path of FNMA and tighten it's guidelines. Here are the upcoming changes that take effect in the next few months:

1. Increased mortgage insurance. The mortgage insurance premium will be increased from 1.75% to 2.25%. Although this is an increase it will only affect the monthly payments slightly.

2. New down payment and credit score requirements. According to the new policy you will have to have a 580 credit score or higher to keep your down payment at 3.5%. All scores lower than 580 will require a down payment of 10%. This actually has little affect on buyers since almost all banks require a 620 plus credit score to buy a home with FHA financing.

3. Reduced seller concessions. The Seller of the home will only be able to contribute 3% to seller closing costs instead of the allowed 6%. Typically closing costs are around 3% but in markets such as Arizona where homes are selling for as low as 70-80k and lower, 3% of a sales price will not be enough to cover all the closing costs.

The changes will become effective on April 5, 2010. A borrower will need to have an FHA case number on their property prior to that date to avoid the changes.