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

---

Convenience Can Be Costly

You've just opened your credit card bill and attached to... Read More

The Ghost of Expected Surprises

Here, Cratchet, what do you think you're doing?Uh, er, leaving... Read More

Credit Cards for Home Business

It is wise for you to have a company credit... Read More

Read and Understand Your Credit Card Statement

Have you ever looked at your credit card statement and... Read More

Online, Phone, U.S. Mail or In-Person: Where is Your Credit Card and Personal Identify Safest?

Identity theft is the fastest growing crime according to the... Read More

5 Surefire Ways To Eliminate Credit Card Debt

Do you have enormous credit card debt? You are certainly... Read More

Credit and Banking Money Saving Services

The first rule when applying for banking and credit services... Read More

Using Credit Cards Wisely

"I think money was stolen from my card" or "I... Read More

Negotiating Rates with Your Credit Card Company

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

Choosing The Best Credit Card To Apply For

Always shop around to get the best deal when choosing... Read More

Credit Counseling Basics

Credit counseling is an option you might want to consider... Read More

19,178 Identity Theft Victims Per Day - Are You One Of Them?

Identity theft statistics are shocking. And we are told that... Read More

Identity Theft - How to Protect Yourself

"Like the tan? I got tons of sun on that... Read More

5 Ways To Prevent Credit Card Late Fees

Paying a credit card late fee is the same as... Read More

10 Ways of Reducing the Risk of Identity Theft

1- Check your credit report regularly2- Secure personal information in... Read More

Dont Trade Your Future for Todays DooDads

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

Is Your Credit Score Being Held Against You?

Credit Scores That HurtIs your credit score being held against... Read More

The Top 5 Secrets to Managing Your Credit Cards?So They Won?t Manage You

You've probably never heard of Frank X. McNamara, but he... Read More

Consolidating Credit Cards

Credit card consolidation is a popular solution for those with... Read More

Keep Your Credit History Clean - Remove A Negative Credit Record From Credit Report

The three major credit bureaus, Experian, Equifax and Trans Union... Read More

How Does a Creditor Determine Whether to Grant You Credit?

Credit 101How does a creditor determine whether to grant you... Read More

Warning: Todays Non Profit Credit Counselors Are Yesterdays Bill Collectors!

Here's a dirty secret, today's "non profit credit counselors" are... Read More

Credit Card Benefits and Drawbacks

Credit cards have both benefits and drawbacks. It is wise... Read More

What Should I Do If I?ve Become a Victim of Identity Theft?

Identity thieves take advantage of everyday opportunities to discover your... Read More

Free Credit Report ? A Website Typo Could Be Costly

In 2003, Congress passed the Fair and Accurate Credit Transactions... Read More

Have You Ever Opened a Checking Account?

Maybe some of you are saving it in your trusty... 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

Compare Credit Card Offers and Reward Yourself

Here's a simple system on how to pay zero interest... Read More

How Healthy Is Your Credit

There's only one way to discover the "health" of your... Read More

Avoiding College Credit Card Traps

Congratulations college freshman! You're about to embark on one of... Read More

To Repair Credit Is No longer Satisfactory - Learn How To Earn A Millionaires Credit In 30 Days...

To repair your bad credit does not necessarily mean that... Read More

Bankruptcy vs. Credit Counseling: What Should I Do?

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

Credit Repair Myths and Facts

There are no secrets to repairing your credit. Many shady... Read More