Entries Tagged 'Credit Restoration' ↓

Great news, yes you can have unpaid collections on your credit report when closing on a refinance or purchase of a new home.   The guidelines changed early this year where they will allow you to keep collections open and unpaid during a purchase or refinance of a home loan.  Judgements still have to be paid unless you can prove that you have made payment arrangements and have been paying on it for 12 months or more.   The underwriter will want some proof that you have paid on time and on a monthly basis.  Make sure you pay with a check or money order and keep a copy of everything to do with the Judgement.   Status of Limitations in Michigan is 6 years for collections and 10 years for judgements.    This goes from the date of last activity.  If your collections or judgements are older then this you can request that they be removed from your credit report.  Call or email if you would like help with this or would like more information about collections and judgements.  Paying off a collection might actually help your score but it could also hurt you.   If your collection hasn’t been reporting on a monthly basis than it is no longer hurting you, paying it off may update the date causing you to have a new update bad mark on your credit report.   On the other hand if you have a collections that is reporting every month then it is best to pay for deletion if possible but paying to get it to stop reporting will also help.  Please call with an comments or questions on this subject.

1. Apply for business credit cards

Most people don’t realize that over 90% of business credit cards do not get reported to personal credit reports. If they are not reported, they are not scored, period.

Many people run their businesses from their personal credit cards and as a result their credit score suffers. You don’t need a big company to get approved for a business credit card; it is much easier to get approved than most people think.

Once approved, you can move your personal credit card debt over to the business credit cards and watch their credit score go through the roof once everything is updated on the credit report.

You need to pick your battles as to which accounts you focus on during the credit crunch to assure your credit score increases enough for you to get their loan approved.

When payment is made on a collection account that is less than 24 months old, the score will either stay about the same or increase a few points. Settling in exchange for deletion is ideal, but not always possible. Given the fact that the collection account will keep selling to other collection agencies in the future, it is best to deal with it while it is still young.

Once an account goes beyond 24 months you need to be careful when settling because the account may erroneously have the date of last activity updated to the current date and bring the score down as a result.

Within the delinquent accounts on your credit report, there is a column called “Past Due”. Credit Scoring software penalizes clients for keeping accounts past due, so past dues destroy a credit score.

If you see an amount in this column,  pay the creditor the past due amount reported, unless that amount belongs to an account that is charged-off or in collection. If that is the case, use the advice in number 1 above to determine the best action.

Your need to be persistent if they refuse to remove the late payments at first.  You should remind the creditors that you have been a good customer and would deeply appreciate their help.

Credit scoring software likes to see borrowers carry credit card balances as close to zero as possible and also see that you have been trusted with a lot of credit - which is why increasing their limits is good.

If your can’t afford to pay down your credit card balances, evenly distribute your credit card balances among all of your credit cards rather than carry a large balance on one credit card to maximize their score.

Closing a credit card can hurt your credit score, since doing so effects your debt to available credit ratio. For example, if you owe a total credit card debt of $10,000 and the total credit available is $20,000, they are using 50% of the total credit.

If you close a credit card with a $5,000 credit limit, you will reduce you credit available to $15,000 and change your ratio to using 66% of their available credit.

15% of a credit score is determined by the age of the credit file. Fair Isaac’s credit scoring software assumes people who have had credit for a longer time are at less risk of defaulting on payments. Therefore, even if old credit cards have horrible interest rates, closing those cards will decrease the average length of time a client has had credit.

Use old cards at least once every six months to avoid the account rating changing to “Inactive”. Keeping old cards active can be as simple as pumping gas or purchasing groceries every few months, then paying the balance down.

An inactive account is given less weight by Fair Isaac’s credit scoring software, so you won’t get the benefit of the positive payment history and low balance that card may have as much as if the account were active.

Most people don’t realize that owing more than the original amount borrowed on a loan is a negative event to the credit score. If possible, pay down the balance on any and all negative amortization loans that you owe more than the original loan amount. This includes mortgages and student loans. Once you bring the balances below the original amounts borrowed, a credit score increase of 5 to 10 points is very common.

Don’t confuse this advice with labeling a negative amortization loan as being bad. They can be a great financial tool when used appropriately and make otherwise unaffordable payments affordable. They can be great as long as your not in the middle of a refinance, but if you are, paying these balances below the original amount owed can maximize their credit score.

So how do you establish credit when you don’t have any and no one will give you a chance?  What if you have a not so good past maybe some collections, judgements, late payments, bankruptcy and even a foreclosure.   First of all never ever close a credit card biggest mith ever, 35% of your score is your “DTI” Debt to Income.  Example if you have a $1000 credit limit and you owe $500 then your DTI is 50%.  If you can help it, you never want to go over 50% DTI.  If you do you will be effecting 35% of your credit score.  Going over 50% DTI is almost as bad as having a late payment on your credit report and we all know how bad that is.  You can go to www.creditscoreus.com for more credit tips or you can call me at 269-488-9530.  I will be putting a lot of time into Credit restoration and your credit score.  Your credit score can cost you 1,000’s if not 10 of thousands of dollars over a life time.  Did you know that some if not most employers pull your credit scores now.   Some and actually most Insurance companies have there own credit scoring system and your rate is determined by your score.   You need to take this very seriously.  Call me any time with any questions.  Happy Fall