Archive for January, 2010

What exactly is a Credit Score? (part 4)

January 29, 2010

This is the last post from this series on your credit score.  To review, we discussed what information was on your credit report, contributing factors to your score, and how to build and maintain a strong credit score.  This post will highlight ways to repair a damaged credit score.

Part 4 – How can I repair a low credit score?

There are a couple points I must make at the outset.  First, there are no easy fix, fast track methods to repairing and rebuilding poor credit.  It… just… takes… time.  Remember your credit score (and report) reveal your track record of managing payments.  If your score is a consequence of your actions, time is how your score will be repaired.  You didn’t drop to a low score overnight, even if “life” did happen (job loss, health problems, divorce, etc.).  This situation took time.  Don’t expect to bounce back to a 780 score overnight.  You need time to prove your ability to manage your finances and to pay expenses responsibly. 

The second point is to avoid unscrupulous credit repair service companies.  These companies often prey upon unsuspecting consumers promising to “fix” someone’s credit and to remove unfavorable information for “3 easy payments of $49.95”.  Nothing could be farther from the truth.  While errors are not uncommon on reports (we’ll discuss this in a moment) truthful information, no matter how unsavory, cannot be removed from your report.  (For information on fraudulent credit repair services, what to avoid and how to report illegal activity visit our website for more information.)  If a bankruptcy or foreclosure happened, it will be reported and will be there for some time.  If you have a credit score, you are an adult.  Let’s not whine about a low score, let’s be proactive and start on a better path. 

Okay, so you are behaving.  Your bills are paid as promised, have a very low debt to income ratio, manage your money well and stick to your budget, and learn your credit score is not where you expected it to be.  Now what??

Start by reading your credit report.  Are the creditors listed, those you actually have or have had accounts with?  Are your name and aliases correct?  Are your date of birth, social security number and address(es) correct?  Many times a keystroke error is all it takes to suddenly combine someone else’s credit history to yours and negatively affect your score.  If you are a “Jr.” or “Sr.” you can certainly understand this scenario.  Other times it may be that a debt has been fully paid and the creditor has stopped reporting the information to the credit bureaus so that a remaining balance still shows.  Surprising as it may sound, even with all the computer systems in the world, credit reports are ultimately managed by people capable of making mistakes.  (No really.)

If you believe your credit report contains an error you have the right to contact the credit bureau that reported it and dispute the information.  There is no cost to dispute this information and it isn’t complicated.  The best way to communicate with any credit bureau is in writing (go old school here) with the letter sent by registered mail with a return receipt to confirm they now have your letter.  (Our website contains a sample dispute letter you can use.)  Provide your complete name and address, clearly identify the item(s) in question, explain why the item is being disputed, and your request to have this corrected or removed.  Include a copy (never the original) of the documentation you have supporting your claim.  (For example, if you paid off that credit card, include a copy of the final statement showing a $0 balance.)  Also include a copy of your credit report with the items in question circled.  Keep a separate copy of everything you are sending to the bureau along with a diary of any activity, conversations and contacts. 

The reporting credit bureau has 30 days to investigate the disputed information and provide you with a written report of the findings.  The bureau is also required to send you a copy of your updated credit report if the disputed item has been changed as a result.

In general with time, a solid financial plan, and some perseverance you can repair, build and maintain your own credit standing.

The Forced End of a Tradition

January 28, 2010

It has long been the tradition of a large mid-western university to hold a televised auction each spring to support public broadcasting.  This auction has been a mainstay of support for the past 35+ years.  However, the university recently reached a tough decision to end this fund raising effort because of a growing negative return on investment.  This is a major blow to their financial situation as well as the on going livelihood of the program.  Over the past 3 years, the auction has been able to raise over $150,000. 

So how will the university be able to replace this influx of support?  In the current economy what are other organizations of any size doing to counter this growing challenge?  How are you being affected?  This is not a new problem, nor merely a local blow.  Non-profits all across the country are being forced to answer hard questions of how to generate revenue while keeping administration and overhead costs at a bare minimum.

How about a ray of sunshine and an idea that works?  What if there was an option that generated real, sustainable income?  What if anyone could participate, the program was self-funding and self-maintaining, and applicable to any non-profit organization.  (At this point, any organization that does not have a need for a single dollar more please stop reading.  Everyone else, read on!)

Awareness Home Funding gives $250 to any 501(c)3 organization that our clients specify when their home loan closes.  That’s it!  Think about this.  Interest rates are at an all time low, there are plenty of homes to choose from, and home buying credits are still in effect.  We handle your supporter’s home loan (and by the way, we do what we do very well) and they tell us about you.  After the loan closes, we have $250 going your way.  But it doesn’t just end there – this is a sustainable program after all.  Your supporters know people.  They have families, friends, neighbors, colleagues, associations and long time relationships.  Anyone they tell about this program is now a source of support for you.  Suddenly, ‘going viral’ has mass appeal.

Today, generating support for an organization is so much more than candy bars and televised auctions.  You need a partner, who cares about you, your cause, your community; a company with support for your home and your heart.  Contact us today and let us start working for you.

866-982-9873

http://www.AwarenessWorks4U.com

What exactly is a Credit Score? (part 3)

January 26, 2010

In part 1, we covered what information was included in your credit report.  Part 2 revealed the components of your credit score and how much each one contributed to your overall score.  Part 3, covers how to manage your credit.

Part 3 – How do I build good credit?

Your buying, and more importantly payment habits, have a direct impact on your credit rating.  Your rating, or credit score, is based on payment history.  The better you are at paying your debt obligations as agreed and when agreed, the higher score you will receive.  Here are 10 tips to establishing and maintaining good credit.

1.  Apply for a credit card.  Creditors want to know you can not only handle debt, but also different types of debt obligations.  This is not a free pass to open an account with every retailer in the mall however.  Limit yourself to no more than 2-4 cards and make your payments on time and for at least the minimum amount each month.  Your credit cards are to be used to maintain or to build credit, not as a way to live beyond your income level.

2.  Make all your payments on time.  As mentioned above, the due date is when your payment must be received, not postmarked.  If this is a challenge for you, consider automatic bill payment.  This is now offered by most creditors, utility companies and banks at no additional cost.

 3.  Avoid late fees.  Late fees are a key indicator that your money is controlling you, not the other way around.  Be advised though, that just because you are not being charged a late fee, does not mean your creditor does not consider your payment late.  Watch your due dates.  (Can you tell timeliness is rather crucial?)

 4.  Stay current.  If you have had a problem and are behind in payments, get current and stay current.  Call your creditor and talk to them.  They are willing to work with you, but they are not mind readers.  They cannot help if they don’t know what is going on.  Most creditors these days would rather receive some payment than nothing at all.  Communication is key, along with a willingness to make an attempt at repayment.  This step can often avoid an account going into collections.

5.  Keep your credit balances at less than 50% of the limit.  This is crucial!  A little known secret here, whether or not you pay off the balance of your card each month, keeping your balance to nothing higher than 50% of the credit limit shows you have available credit.  Available credit means you are most likely not overextended, and that can mean low credit risk.

6.  Do not open new cards as a means to increase available credit.  It is far better to manage a few accounts successfully, than to have several accounts with little to no activity.  Remember the idea is to prove you can manage your finances, not that you can open accounts.

7.  Review your credit annually.  Knowing what your creditors are reporting helps you avoid surprises or potential problems.  It is not uncommon to find errors on your credit report. 

8.  Establish a budget.  Despite how some may feel, ‘budget’ is not a four-letter word.  It is a plan for you to control your money so that it does not control you. Non-mortgage debt should not be more than 20 – 30% of your gross monthly income.

9.   Ask for help if you need it. No one is perfect or has all the answers.  If creating a realistic, working financial plan seems out of reach, ask for help.  Consider contacting a reputable credit counseling organization with trained advisors in this area.  Do not be confused with a Credit Repair Company though.  Many offer claims to remove information from your credit report.  You cannot remove truthful information.  Time is your ally for credit mistakes. 

10.  Start now.  Just because your credit has been a problem does not mean that all hope is lost.  You can have great credit again – just start.  Pay all your bills on time, every time, as agreed.

The Rules are Changing

January 25, 2010

Over the past couple of years requirements for obtaining a mortgage loan have become tougher to say the least.  For example, no longer can you simply just tell your lender what you earn – you need to prove it.  Your credit scores also need to be very good or excellent to be approved.  Just having a pulse no longer works either.

The plus side of tighter regulations is that consumers are more prepared to purchase a home.  They have worked to maintain a strong credit score; they have money to not only use as a down payment, but also funds available in reserve for after the sale.  Lenders themselves are also doing their homework.  They are paying much more attention to what is in the best interest of the borrower, and not just the bottom line.   Lenders that have not are no longer in business.

So what changes are being proposed this time?  The most significant changes are an increase in the minimum credit score, an increase in the upfront mortgage insurance premium, and a decrease in the amount a seller can contribute to a buyer’s costs. 

For most borrowers, the increase in the minimum credit score has already happened in effect because of what individual lenders will allow.  According to FHA policies, borrowers are required to have a minimum FICO credit score of 580 to qualify for the minimum down payment requirement of 3.5%.  Most lenders however, have a much higher requirement, most at a 620 score or better in order to qualify for a loan.  If you find a lender that will still accept the lower minimum score, be prepared to pay higher fees or accept a higher interest rate.

The increase in the upfront mortgage insurance premium is a significant change.  Until now, when a borrower has less than 20% invested into the home, mortgage insurance is required.  This insurance is to protect the lender in the event of a foreclosure.  FHA is a self-funded government agency that has been able to support itself from the monies raised from these premiums.  However, with the recent increase in foreclosures, the agency has had its reserves fall below the minimum level set by Congress.  FHA hopes that increasing the premium from 1.75% to 2.25% of the total loan amount will resolve this problem.  Unfortunately this means that the borrower of a $100,000 house will have the upfront premium increase from $1,750 to $2,250, or $500 more.  This change will become effective sometime this spring and for now only affects the upfront premium, not the monthly mortgage insurance premium.

The final change is a decrease in what a seller can contribute toward the buyer in a purchase transaction.  Until now, a seller could pay for up to 6% of the buyers closing costs.  This will now decrease to a 3% maximum.  This too will affect the amount of money a buyer will need to invest into a purchase transaction.  This change is expected to be effective in the early summer.

All this means that if you have been thinking about purchasing a home, ‘now’ is becoming a better and better time to do so.  Especially when you consider the extended home buyers credit that offers up to $8,000 for first-time buyers and up to $6,500 for other buyers who meet the qualifications.  If you need to wait though, don’t panic.  Simply be prepared to be more prepared when buying that home you have your eye on.

What exactly is a Credit Score (part2)

January 22, 2010

Last time we gave you some information on what components are included on your credit report.  This time we’ll dive a little deeper.

Part 2 – How is a credit score determined?

Have you ever wondered how that three digit number that so much of your life depends on these days is reached?  While no one outside of the organization that designed the number knows exactly, some basic information is known. 

Your credit score is a complex mathematical model designed by the folks at the Fair Isaac Corporation (FICO).  Three different credit bureaus use the data collected to determine an actual score based on this model.  The data is reported by creditors to these agencies – Equifax Credit Information Services, Experian and Trans Union National Disclosure Center.  (You can find links to these agencies on our website.)  A credit score can range from 300 – 850 where, the higher your score the less risk you represent.

Your score is based on five criteria that carry a different ‘weight’ in relation to the whole score.     

1)      Your history of payments accounts for 35% of your total score.  Payment history covers how you pay your bills and if there have been any collections, bankruptcies or judgments. 

2)      The balance and available credit on your accounts factor 30% into your score.  An account near the credit limit poses a much higher risk than one at less than 50% of the limit.

3)      The length of history on any account has a 15% weight.  The longer an account has been open and active, the more time you have had to ‘prove’ yourself. 

4)      The number and type of credit you have accounts for 10%.  More open accounts, has a potential for greater debt and therefore a lower score.  More variety of accounts though can show more experience with different types of credit and generally a higher score.

5)      New credit accounts for the remaining 10%.  Brand new accounts often signify new debt.  Multiple inquiries within a short timeframe can also indicate you are looking into taking on debt. 

In general, lagging payments and multiple new accounts can indicate a problem and therefore reduce your credit score.  The better you are at managing your finances and paying bills as expected, the lower risk you are and that translates into a higher credit score.

A team approach

January 21, 2010

When you see the real impact that groups working together can have, it is impressive to say the least.  This morning we met Paula Deen, well known chef, restauratuer, and spokesperson.  She has been partnering with Smithfield meats in their effort to end hunger in the United States.  The reason for her visit was for their donation of 40,000 pounds of meat products to Feeding American West Michigan Food Bank.

Perhaps what impressed me most, was her personal connection to those struggling to provide food for their families.  She was once “there”.   As she explained the goals Smithfield and Feeding America has, she was moved to tears that this problem still faces so many. 

As a company, Awareness Home Funding is structured to help organizations like Feeding America help others.  As individuals, we may not have much impact.  But, as Paula indicated, working together we surely do.  When we are able to help you, your friend, their colleague, and that person’s family member that single donation from each loan suddenly has tremendous impact.  The power of one telling one.  Tell someone you know and let us help you help them.

Timing is Everything

January 19, 2010

Timing is everything.  When should you launch a new product?  When do you reveal the punch line of a joke?  When is the time to ask for help?  The answers to these questions have a direct impact on your desired results.

Are you looking for the perfect time to implement a new fund raiser or promotion?  Let us put your concerns to rest and assure you that now is the perfect time.  In fact, any time is a perfect time to use our Awareness Works 4U program.

We donate $250 to organizations like yours every time we close a home loan – purchase or refinance.  We give you the discretion to use the $250 based on your timing and needs.

Most non-profit organizations have 1 or 2 major fund-raisers each year they rely on to fund their annual budgets.  Our program is the perfect addition to any promotion.  Successful groups also know that they need consistent contributions throughout the year to keep programs running efficiently.  Our program is the perfect ‘filler’ between major events to keep your name in front of your supporters. 

The Awareness Works 4 U program is easy, effortless, efficient, engaging, energizing, empowering, effective and timely.  Do not waste another day.  Contact us now and start taking advantage of this innovative approach to support your goals.  Let us earn your trust.

866-98-AWARE or ContactUs@AwarenessHomeFunding.com

What exactly is a Credit Score? (part 1)

January 18, 2010

It is nothing new, that a report of your credit is ordered when applying for a loan.  But in recent years, your credit standings are used to determine so much more, like how much you will pay for auto and home owners insurance.  Your credit can also be used by potential employers as a criterion for offering you a job.  That 3 digit number wields a great deal of power these days.  So just how is that number determined?  Maybe more important is how can you control it?

The next few posts will touch of some of these questions to help you understand, what a credit score is, how it is determined, how to build a good credit score, and how to repair a low score.

Part 1 – What goes into a credit score?

Your credit score will include four types of information: public record, credit, credit inquiries and personal.  Information of public record are pieces reported by the judicial system.  It may include judgments, foreclosures, bankruptcies, tax liens, or overdue child support.  Depending on what type of information is disclosed on your report, the data could stay there for 7-15 years.

Credit information is data relating to specific accounts you have or have had in the past.  For each account the date opened, credit limit (or original loan amount), balance, payment amount and payment history will be listed.  Your report will also detail those accounts you are a co-borrower on.  Negative information can remain for up to 7 years from the date it was last reported.  Fortunately positive information can remain indefinitely.

Requests by other creditors to review your credit history will also be listed on your report along with the date requested.  This information is visible to anyone else who may request your credit.  Information for the purpose of extending pre-approved credit offers are only revealed to you and do not impact your overall credit score. 

Personal information includes your name, address, phone number, social security number, date of birth, employer and sometimes your job title.  The report will include both current and past information.

Knowing this, it is easy to see why your credit report is so important to understand and monitor.  The next post will touch on what goes into determining your actual score.

Show Me the Money??

January 15, 2010

With changes in the current housing market, home values have decreased, supply has increased, government programs have been extended, and buyers are taking advantage.  And the timing couldn’t be better.  However, let’s suppose you find that perfect home and someone very near and dear offers to give you a generous gift of money to help with this purchase.  What do you do?  Do you need to disclose this to your lender?  Does it matter to the sales transaction?  Can you deposit the gift into your bank account?  Does there even need to be a record of this gift of money?  Is this kind gesture going to create a problem?

First, say thank you!  (Your mother raised you right after all.)  Second, don’t panic.  This very kind gesture can do exactly what the gift giver intended to do – help you.  However, the gift does need to be disclosed, it does matter to the transaction, it can be deposited, and it does need to have a paper trail.  But if you keep a couple simple steps in mind it does not need to create any problem. 

  1. Let your lender know you have a gift to include into your home purchase.  Do not head to your bank with the funds.  
  2. With the help of your lender, have your donor complete a gift letter.  This is actually a form letter that specifies who is giving the gift, where the funds are coming from (what account), who the funds are being given to, the amount given and that there is no obligation to pay the money back.
  3. Have the donor request a verification of funds from their bank.  This is also not as scary as it sounds.  Your lender and underwriter do not know Dear Uncle Joe or his financial standings.  They need to confirm that the money being given is actually available.  However, Uncle Joe does not need to divulge his entire life history.  A simple statement from his bank, on their letterhead just needs to state Uncle Joe’s full name, the account number from where the funds are coming from, and that the amount being gifted is actually available to give.
  4. Rather than a check, have your donor give you a cashier’s check made out to you and the Title (Escrow) Company.  This will avoid your need for an updated bank statement and gets the money where it needs to be – allocated for your home purchase.

And that’s it!  Just keep in mind that gift funds are meant to be just that, not temporary loans.  The part where problems often occur is when the funds are not clearly disclosed and documented.  Don’t be afraid of this.  Keep these simple steps in mind and the best of someone’s intentions can help you both out a long way. 

Leave us a comment if you have questions about gift funds or anything else related to home loans.  We’d be glad to help.

Everyone Wins With More

January 13, 2010

The base of support for most non-profit organizations is comprised of two similar, yet very distinct groups.  The first group covers about 15% of your members that fund nearly 85% of your annual budget.  The second group contains 85% of your members providing the remaining 15%, an equally important part of your support.  However, what if you could empower the 85% majority to significantly increase their overall level of giving without increasing their personal donations?

Our Awareness Works 4 U program can do just that.  The only requirement to receiving a $250 donation from us is for a client to mention your name when asked.  The power of a suggestion to a relative, friend or colleague never had more impact.  You have just given anyone associated with your program a painless way to raise more money, without you having to ask for more.  Talk about a win-win-win situation!

You win because your supporters now have another reason to tell others about you. Our clients win with a great home loan experience.  The community wins because we have pooled our resources to make it a better place for everyone.

Let us give your supporters a new reason to share you with others today.  Contact us today!

866-98-AWARE or ContactUs@AwarenessHomeFunding.com