Fluctuations: Pretend that you are looking at a thermometer. It goes up and down depending on the temperature. In the summertime, the temperature on the thermometer stays up during a heat wave. Think of your credit in that way. You want your credit score number to stay up and as high as possible.

What is the Credit Score Scale?
A credit score scale is a list of numbers, sort of like a thermometer. But, instead of it being in degrees, it is in numbers from 850 downward to 300. 850 being the highest number you can achieve and 300 being the lowest. Remember the thermometer. You want your credit score to be as close to the highest number, which is 850.

Credit Score Number: Generally speaking, if your score is between 720 and 850, you have excellent credit. If your credit score is between 620 and 719, you have good credit. A score between 580 and 619, your credit score is considered poor. Anything below 579 is very poor. As your score falls, as in a thermometer, you become lower and lower on the credit score scale.

The Cost of a Mortgage: The reason to keep your credit score number as high as possible is because the higher the number, the less it will cost you in interest when you obtain a mortgage on your home. Your monthly payments can be considerably less, over the life of your mortgage loan, with the lower interest rate. It saves you money.

A lower credit score number will cost you more money. It is lower on the credit score scale. Your interest rate will be higher and so will your monthly mortgage payments. The location of your credit score number on the credit score scale will affect all purchases that require a loan.

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While qualifying for government backed loan like a VA loan or FHA loan is less difficult than Fannie Mae conventional mortgages when it comes to credit scores, you will still need to have decent scores to be considered for a mortgage.

If you have good scores great (say greater than 640), but if you don’t – do you know how to get your credit scores up or do you need to hire a credit repair company?

Credit scores are a function of what your credit report shows, and what your credit report shows is supposed to be a representation of your credit history and situation. Therefore, if you have some late payments and maxed credit cards you most likely have lower scores. Conversely, if you have low balances to your limits and have never missed any payments then you will probably have high credit scores.

Credit reports are created based on the information that your creditors report about you to the credit bureaus. Once the bureaus get your information, they then build your credit report. Once your credit report exists, then it is possible in most cases for the credit bureaus to calcuate your credit scores.

In the complete process from creditor records to the credit bureaus to your credir report, sometimes mistakes happen which can result in incorrect information showing up on your credit report. As such, some of this information, if it were the right information, could be harmful to your credit scores.

Now that you know that credit scores are based on the information contained in your credit report you should see that improving your credit scores can happen in a few ways.

First you can take proactive steps like not missing anymore payments and letting time pass from when you had your missed payments, or you can perhaps payoff some of your credit accounts (without closing the credit accounts).

Second, you can correct incorrect information on your credit report.

In the first case, there’s not much someone else can do to help you (unless they gave you the money to pay off your debt). In the second case, you can challenge the incorrect information yourself of your can hire someone to do it for you. You will have to make that choice yourself.

If you are working with a competent loan officer who has been in the mortgage business for awhile they ought to have some insight as to what you can do to improve your scores without having to pay someone to do it for you. In some cases you won’t have to work too hard to get your scores to move up enough to allow you to qualify for a home loan, but in other cases you may have a lot more work to do. For this situation you may want to consider having someone do it for you. Again, you will have to make that choice.

In the end, better scores means better home buying options you will have to decide how to get your scores up.

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According to a recent article in the Los Angeles Times, mortgage interest rates are at their lowest levels in five weeks, and not surprisingly more people are seeking home loans. However, the increases had been driven by the refinance market and not necessarily by new purchases.

This is both a positive and a negative for some homeowners. On the positive side, this means they are able to refinance their homes at a lower rate and take advantage of equity in their homes. But on the negative side, this assumes that the borrowers who are purchasing new homes still have good credit, can make at least a 20% down payment on residences with value of no more than $417,000.

Having indicated the above, it should be noted that there are loan programs available to the consumer whether refinancing or purchasing a new residence. An example of a lower down payment program is the FHA financing.

FHA loans are guaranteed by the government and offer more flexible guidelines than traditional mortgages.

Two important keys to this type of program:

Loan amount available up to the maximum JUMBO FHA limit in your area
FHA financing is for Everyone and not limited to first time homebuyers

When considering to refinance or purchase, a new property, the consumer must be prepared to present a complete financial package to their lender.

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One product for the consumer to consider is FHA Financing. FHA loans are guaranteed by the government and for the new home buyer offer low down payment options that are in some cases have more flexible guidelines than the normal traditional mortgages.

Some of the features to this type of product are but not limited to depending upon the consumer’s situation are as follows:

• Down payment of 3.5%
• Allows for lower credit scores
• Cash out refinance transactions up to 85% loan to value
• Loan amount available up to the maximum Jumbo FHA limit in your area
• No minimum or maximum income limits

As a consumer if you are considering a refinance or a new purchase, you need to have all of your financial information available. By having all the information available, the lender will be able to assist you and explain to you all your various options whether under a FHA financing program or another loan program.

• Always be truthful to the lender
• Have complete copies of last two (2) federal tax returns including all W-2’s on all borrowers
• Have copy of most recent paystub for all borrowers on the transaction
• Have a copy of last two (2) months bank statements on all accounts and any stock/investment accounts
• If refinancing, have a copy of most recent mortgage statement
• If refinancing, bring copies of original documents in regard to mortgage
• Prepare a list of all assets, including names of banks, average balances along with a list of all liabilities, i.e., auto loans, credit cards, 2nd home mortgages. Note the lender can receive this information via a copy of your credit report. But having the information available at the meeting is important.

At this meeting, the lender will be able to approximate, what your debt to income ratio. The final ratio is determined by credit underwriting.

By having this information available, the lender should be able to discuss with the consumer various types of loan programs, which will meet the consumer’s financial position. If you are a new home buyer, it is important that you have money available for a down payment. A new home buyer should not be pushed into any program or loan that is at more than 80 percent of the lendable value of the home.

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Consumers are facing financial hardship such as the lost of a job, reduced salary, divorce, death or a medical emergency. During these times – loans, bills and credit cards can quickly pile up and destroy the consumers ability to repay their financial obligations. Needless to say, these obligations weigh heavily on the consumer.

So what is the consumer to do about this situation? Some of the solutions make sound simply, in a normal economic such as:

Understand your credit report
Recognize financial situations
Borrow only what you need
Pay all bills promptly and more than the required monthly minimum payment

The consumer needs to try to at least to rein in their spending and establish some type of budget to mean their monthly obligations. One way to reorganize their financial situation is to:

Call their mortgage lender to discuss a loan modification This will achieve lower monthly payments
Order a credit report The consumer needs to know their credit score and identify any errors.

If the above does not fit your current financial situation then the consumer needs to look for other alternatives. One of the other alternatives is a debt settlement program. This type of program is designed to assist those consumers who are having financial difficulty. The debt settlement company will start to negotiate with the lender on your behalf.

So call for a free consultant today with your debt settlement expert.

A good credit rating is important because it affects every major financial decision the consumer makes. The better your credit rating normally, the lower your interest rate on your mortgage or car loans because you are better credit risk than someone with a lower credit score. In other words, if you have a positive credit history, meaning you repay your loans on time then you have a good credit. If you have a bad credit history, which means you are late on payments you have bad credit.

The three major credit bureaus are: Equifax, Experian and TransUnion. These companies use a scoring system that rates your credit by giving it a numerical number. This numerical number is considered your score and can range from 300 to 850 depending upon the credit bureau. On average, the majority of consumers should have a score in the mid 700 range to be considered a good borrower. Anyone with a lower then 650 is considered to be a poor risk by lenders.

Having indicted that lower than 650 is a poor risk. Credit card companies continue to issue cards to these borrowers but the rate is much higher than a consumer with a higher credit score. So how does a consumer improve their score?

Here are a few ways to improve your score:

• Make a list of all bills and their due date
• Make a family budget
• Enroll in an automatic or direct payment program – in same cases, you can get a lower rate by using these programs
• Monitor your credit report quarterly for errors
• Consider credit counseling to get tips on how to improve your spending habits
• If divorced, close all joint accounts after divorce. Start to rebuild credit in your own name
• Take responsible for your spending habits

Some of the things the consumer needs to revisit are the following key ideas:

• Does my family have a financial plan for the future
• Am I borrowing wisely and paying back promptly?
• Have I identified, avoided and recovered from various financial pitfalls?
• Have a gotten a recent copy of my credit report and do I understand it?

Everyone at some point in time has applied for some type of credit, whether it be for a auto, boat, RV loan, a home mortgage or a credit card. The consumer has normally been approved for a loan based upon their ability to repay the loan, cash flow and their credit score.

The key to being a good credit risk is based upon the consumer’s credit score. This score is a numerical number assigned to the consumer based upon their credit history. This history is based upon number of opened and closed accounts, payment history, including late or missing payments and collection referral, original credit limit, current balances, etc. The higher your credit score is the better your ability to borrow at more favorable interest rates. The lower the score the consumer is charged a higher interest rate or decline altogether.

Basically, the consumer needs to obtain a copy of their credit report from one of the following three credit bureaus: Equifax, Experian or TransUnion. These companies’ reports will explain where the consumer stands when compared to other borrowers along with explaining their financial score.

• Try and manage their current debt themselves – in other words tighten their belt and spending habits.
• Debt consolidation loan – this would combine all outstanding unsecured debt into a single payment loan. The problem is can the consumer qualify for a new loan with no job or financial hardship issue.
• Refinance or Home Equity loan – This might work, if the consumer has enough equity in their home, however the repayment may be an issue.
• Credit counseling service – This program acts like a debt consolidation loan. The consumer pays a third party company who in turns pays a small or set percent each month to the lenders until all the balances are pay off. In addition, there is credit counseling for the debtor and this will also have an affect on your credit score.
• Bankruptcy – This is the most serious and the final step that a consumer should consider. The consumer needs to discuss with bankruptcy attorneys all facets of bankruptcy since it will cover all debts, both secured and unsecured.
• Debt settlement – This is a program by which a third party negotiates with the lender in order to reduce the outstanding balances on unsecured credit cards.

Here is a brief overview of the debt settlement process:

• The consumer needs to have a full and complete understanding of the process. The debt settlement company needs to explain all the in’s and out’s of the program.
• A “trust/escrow” account is established an a set amount in place in the account. Normally, this is less than the combined minimum monthly payments.
• After at least half of the lowest outstanding credit card balance is in the account then the debt settlement company begins to negotiate with the lender. The debt may be reduced by up to 40 to 50 percent. In most cases, the lender would rather have at least a partial payment at one time than receive nothing if the consumer files bankruptcy.
• This process is repeated until all debts are negotiated. This process can take between 12 to 48 months. It’s not a quick or easy fix however it will assist the consumer.

In the past, the consumer has been paying the 2 percent minimum monthly payment, it would take years to just payoff their current balances. So at the direction of the federal government, most credit-card companies are increasing the amount of the consumer minimum payment from 2 percent to 4 to 5 percent. The good news is in a good economic or without financial hardship by paying a higher monthly payment you’ll pay off your debt more quickly. The bad news: Your now have the additional burden of coming up with more money each month.

This is not a quick fix or easy step for the consumer. This program can take been 12 to 48 months depending on the consumer’s obligations. Basically, the program requires the consumer to place a set dollar amount aside each month into a “trust/escrow” account. Once there is at least half of your lowest credit card balance, then the debt settlement expert will start to negotiate with your lender. The key to this program is that the lenders are more likely to accept some monies from the consumer than receiving nothing from the consumer if they file bankruptcy. Under bankruptcy, normally the secured lenders receive their monies first and in most cases the unsecured lenders receive up to little or nothing. By receiving nothing, the lenders have to write this off as a loss or bad debt on their financial statements.

The debt settlement program is a better option than bankruptcy for most consumers. If a consumer is considering bankruptcy they should consult an attorney before taking this step. Whereas a debt settlement program will allow a third party to negotiate on behalf of the consumer for a settlement of up to 50 percent off their current outstanding balances.

Contact a representative today!!