“Ways to Improve your Credit” Series
Part 1
The recent downturn in the economy has wreaked havoc on the real estate trade, the employment sector and in the lives of many Americans that we know and with whom we work. Our trade depends on being able to get qualified buyers to the table to purchase homes. Without qualified buyers, the market is at a standstill, and was so for a stretch back in late 2007, early 2008. At that time, the market fell over a cliff and banks tied a strong knot in their purse strings, and well, we all know the rest.
Luckily, things have been slowly but surely improving over the last couple of years, most notably over the last few months. Banks are loosening up their purses, and buyers and sellers are again meeting at the negotiating table. Though the lending guidelines are far from being lax, they are making it possible to get deals closed once again.
The key to get a deal closed now depends squarely on the borrower's credit. For most banks, the cut-off is at 640, although there are a few banks that can work with a FICO of 620. We here at Platinum Mortgage Company (PMC) have, in our arsenal, a bank that works with FICO scores down to 500... but that story will be for another day. For those of you who are not positioned to have access to that
particular lender, your only other hope is to get your borrower's credit scores up, and fast.
I will be presenting a series, beginning with this blog, on how you can help raise a credit score. Be forewarned, there is NO fast credit fix, and anyone that tells you differently probably has some swampland they'd like to sell you in Florida too...Now, some of these items your borrowers can probably do on their own, while others might need the assistance of a savvy Mortgage Loan Originator who knows the ins and outs of credit repair. If your loan person doesn't have that knowledge or doesn't want to invest the time to help get it done, there are hundreds of other MLO's that are willing to take the time to assist your borrowers, believe me.
Tips to help raise a FICO score
Keep all balances below or at 30% of the credit card limit – lenders want to see that the borrower is not relying on his or her credit cards to get by; credit should only be used sparingly. Likewise, do NOT pay off the entire balance; contrary to popular belief, this will not raise your credit score and might actually cause it to fall.
Pay down balances and do a Rapid Rescore – your MLO can help you with this step. This process helps you booste your score really fast by making simple adjustments to your credit and then re-scoring within days or weeks.
Increase the borrower's available credit - there are several ways to do this, but you must be careful to do this properly, otherwise the borrower's credit score can fall. An example of this would be to open a sub-prime credit account.
Correct any and all mistakes on the credit report - things such as misspelled names, invalid accounts, improper collections and erroneous late payments can drag a credit score down to the nether regions of the FICO scale. If you can prove the reporting is wrong, the credit bureaus must correct it or remove it completely, which usually helps raise the credit score.
Have the borrower “Opt-Out” - this is something the borrowers can do on their own. By opting out, they are effectively removing themselves from mail offers to open new credit. In some cases, this can raise a FICO score by as much as 25 points, or in some cases, as little as 1 point. There is no magic credit fix, no way to snap your fingers and instantly have a 780 credit score, but with a little effort, some of those “dead” files can be revived, or at least given a second chance for review. Very few credit reports that pass through our desks nowadays are blemish-free, but knowing a few tricks of the trade can help get some of those stalled files off your desk and onto your pipeline.
If you have questions or need some assistance with a particularly tricky file, I can be reached at
the number listed below. Happy prospecting!
Written By:
DRE 01354095/NMLS 255430
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