You and your Credit (So...do you want a divorce?)

YOU AND YOUR CREDIT

(So...do you want a DIVORCE?)

For some of us out there a divorce from your credit report would be a Godsend. No matter who you are, your credit score is either saving you a lot of money, or it is costing you a bundle. And for those of you who have been in the job searching market you have probably run across more than one employer that has used your credit score as part of your overall evaluation in the interviewing process. Having a laundry list of late payments and collections is a huge red flag and will leave your prospective employer wondering if you will be irresponsible on the job as well as in your personal life.

Before we go over what hurts your score and how to improve your score let me first give you some useful information as to how a lender in the mortgage business will treat your credit report.

When you apply for a loan most lenders now do a tri merge report using Transunion, Equifax, and Experian, the most common repositories. When your lender pulls your credit they receive a snap shot of a point in time, a snapshot that can be different two days later.

I am not sure how I discovered this, but I noticed that after you pull a persons report, you can go and re-pull it two days later and get a different score; sometimes. Now how does that work? As I said, the report you get is a snapshot in time and not all three companies are reported to the same day of the month. For example, your Macy's card my report on the fifth of each month while your Capitol One card reports on the fifteenth. When you scan your report look to see if all the items reported have reported from all three agencies. If you find that some of your cards did not report to Transunion yet, wait a week and re-pull. This could help or it could hurt you. If you have three other cards that you know you have great history with your score can actually go up in a couple of days when those cards report. There have been a number of times that I pulled a borrowers report and their score was just below 500, so I could not help them. I would wait a week and re-pull and surprisingly their score ended coming it just above 500 and I was able to do the loan. Now this tactic can bite you as well. If those unreported cards have a bad credit history your score may drop. It was sometime later that a representative from one of the companies did a talk at our office and shed light on that subject.

If for some reason you do not qualify for the loan you are looking for, ask the lender how much higher a score you need try to determine if you may be helped by pulling your credit a week or so later. I just might save you.

Not all collections reported are equal. This may not be news to you but it bears mentioning. Consider this case. Joe Borrower has a 680 mid score on his report and has a few dings on it as well. He has two collections, one for $700.00 and one for $2600.00. The program guidelines are okay with up to three collections provided that none of them exceed two thousand dollars. Moral of the story, take care of those collections, especially the ones above one thousand dollars. Sometimes lenders will give you the chance to pay off some of your collections and will work with you once that is taken care of. Your score won't improve though, that can take a good ninety days. If you are told you score needs to improve you should consider a requesting a rapid re-score. I would ask your loan officer to do this as the companies will respond to him faster. Before you do that, make sure you have all your ducks in a row. You must show receipts of payments made before the lender will help you.

Once your credit score has gone in a free fall, it is much easier for it to continue falling than for it to turn and head back up.

Things that help/Things that hurt: If you are familiar with the term rolling thirties, you probably have less than spectacular credit. If you get a thirty day late on your mortgage, we all know your score will take a good sized hit. How big, no one can say for sure. The size of the hit depends on your whole risk profile. If you have numerous revolving accounts open and have showed the willingness and ability to pay, but have a thirty late on your mortgage, the hit will be smaller. If you are a person struggling under a heavy load of debt that hit on your mortgage will be more significant. I wish I could elaborate on that but it is too complicated a process.

So, you now have a thirty day late on your mortgage. What do you do next. If you are relatively certain that this was just a one time aberration, go ahead an catch that payment up as soon as possible. On the other hand, if you have just lost your job and are uncertain of your future income, you will fare better, report wise if you let that mortgage late roll. In other words, don't catch up yet, just make sure you do not get another late, or go sixty days late. If you are now making every payment on time but have not made up that late payment you have what is called a rolling thirty. Most companies will let you have a rolling late for six months to a year, some even more, and your credit only takes the one initial hit. There is the biggie, only one hit. Now if you catch up, then go late again, then catch up then are late again, each late payment after catching up is counted as a new thirty day late.

Bottom line, eventually you will need to catch up that payment, and letting them roll is a short term strategy used to enable you to get the loan you are going to apply for. After your loan funds you need to see about making up that payment.

Watch for the next credit report installment, coming soon. We will go into detail what can help and what can hurt your credit.