How to Lower your Credit Scores

How to Lower you Credit Scores 

Instead of going through the strenuous process of raising your credit score we should cut to the chase and talk about how to destroy a perfectly good credit score. After all it is easy to make scores tank but it takes work, practice and good habits to build and maintain a good credit history.

In the event you are unsure of what a good credit score is suffice it to say anything above a 740 would be considered a good score by any bank or lender for most loan purposes. Scores in the range of 680 to 740 would be considered at least fair by most banks and lenders. So for the sake of our story you get to start out with a 755 credit score … just like Henry Aaron you get a 755.

Getting to a 755 takes good habits. It requires good borrowing habits, good payment habits and good spending habits. Once you achieve a 755 you will get plenty of opportunities to destroy your credit. In fact some lenders and credit card companies will be very blatant in their willingness to help you abuse your credit score. They are so glad you spent the 5 to 10 years to build your scores, maintain your payments and exhibit good spending control they will now allow you to squander your efforts pretty much just by signing a piece of paper and mailing it back or even just by phoning them and giving them a code from your offer.

To best destroy your credit without even going through the effort of applying for new credit you should simply be late on your credit cards, car payment or mortgage payment. In fact being only 31 days late with your mortgage payment should knock you down a couple of dozen points or more. If your credit is deep, meaning you have a great payment and spending history on several accounts, you will not be able to do too much damage with just one late mortgage payment. In that event you should go on to the next step.

Since you failed to do much damage to your score by being late with a mortgage payment I recommend strongly you do your best to be at least 30 days late with 2 payments. But don’t be late 2 months in a row. Skip a month and then be late with 1 other payment at least 30 days. That should do it for a few months.

Now wasn’t that easy? Chances are you dropped your scores at least 100 points in just 4 months. You may, depending on the depth of your credit history, manage to lower your scores as much as 150 points or more! Congratulations!

Hopefully you are able to recognize a spoof when you see one. The examples are fictional but the results are very true. Never be late, never over spend (keep your credit cards at the limit), be careful about what type of new credit you apply for and when, and always be conscious of your credit scores. Regardless of what Suze Orman says when it comes to borrowing, you are your credit score.


Contact The Mortgage Mark with any questions!

www.themortgagemark.com    mwilkins@capitalfmc.com 

Protect your information when applying for a mortgage.

Your private information is never more vulnerable than when you are applying for a mortgage. It is inevitable that you will have to provide someone with the keys to your entire life. This includes paystubs, W-2’s, bank accounts, stocks, bonds and of course your social security number. It is also very possible that you are giving this information to a complete stranger. So how do you know who you can trust? Here are some things to consider:


1. Check to see if your loan officer is licensed to originate mortgage loans in your state. You can start by checking the NMLS (National Mortgage Licensing System ) consumer access site @ http://www.nmlsconsumeraccess.com/ . In order to be listed on the NMLS , a loan officer must undergo a full background and credit check. If your loan officer is listed here, they have passed the background check. Not all states are currently listed on the NMLS, so confirm that your state is currently a participating state before alarm bells go off if your loan officer is not listed. Here is a list of current states on the NMLS.If your state is not listed, do a search for your states mortgage originator license requirements. It is also not unreasonable to request that your loan officer provide you with a copy of their license. Something else to note, loan officers for federally chartered banks are not bound by the NMLS licensing requirements.

2. Whenever possible, go directly to your loan officer to submit your financial documents at their office. Take a look around the office. Are all state licenses displayed in plain view? Do you see loan files spread all over the place? Are sensitive income documents in plain view? These are red flags! All loan documents should be kept under lock and key at all times, unless they are being reviewed. A responsible loan officer will have a desk that is clear of sensitive information.

I believe that the mortgage industry is primarily made up of upstanding professionals. Through regulations like the NMLS, it is getting better every day. Still it is necessary that you perform diligence to protect your identity and your assets.

Calculating a mortgage payment “in your head”

Any real estate agent who has been in the business more than a few minutes and has shown a home or two has been asked the question, “how much would the payments be?” Chances are the agent does not have their mortgage calculator in their hands to input the mortgage rate, loan amount and other important factors. However, they do have their brain available and can easily estimate a mortgage payment for any home.


Real estate agents are not expected to be mortgage professionals but customers shopping for a new home do expect them to be able to answer the monthly payment question. There is a very simple way of calculating a mortgage payment based on any rate and it can easily be done without a calculator or even pen and paper.

Calculating the interest would be quite straight forward. The trick is always getting the principal added back in to the payment. So, in disregard to accuracy to the penny (or even the dollar for that matter) you can use some historic data to calculate the mortgage payment.

First you need to know the sales price. This should be simple for anyone. Then you need to know the down payment amount. Subtract the down payment from the sales price and you have a good idea of the loan amount provided it is not a loan that allows mortgage insurance or other costs to be financed into the loan. Next you need the interest rate. It would be almost impossible for the agent to know the actual interest rate of the client so use a fair average of where rates are for the day - the agent and shopper both likely know this number.

For most homes in America priced around $150,000 to $300,000 the property taxes and home owner’s insurance will equal about 1% of the loan amount per year. Using this very rough and loose average to add 1% to the interest rate for the day. Still a pretty easy calculation but what about that principal?

You are in luck because you are not being asked to provide an amortization schedule but only a payment. For a 30 year amortization the first year’s principal is about 1.2% of the loan amount. Add 1.2 to your total of the interest rate plus the 1% for taxes and insurance. Want to see an example?

Loan amount $120,000

Interest rate 5.5%

Taxes and insurance 1%

Principal 1.2%

5.5 + 1 = 6.5 + 1.2 = 7.7

Now comes the fun part. Break the loan amount down into 1s and 0s. Like 100,000 and 10,000 twice. It is much easier to calculate mortgage payments when you are multiplying by one!

100,000 x 7.7 = 770

10,000 x 7.7 = 77 (70 x 2 = 140) (7 x 2 = 14) (140 + 14 = 154)

770 + 154 = 924

A good estimate of the monthly payment for a $120,000 loan at 5.5% interest amortized over 30 years is $924 per month PITI. Obviously if you are an agent you want to disclaim many times that you cannot be held to this and only the mortgage professional can provide an accurate payment based on many different criteria

Contact The Mortgage Mark With any questions!!
 
http://www.themortgagemark.com/
 
mwilkins@capitalfmc.com

Mortgage qualification - the big three

The mortgage process, especially for those who are denied or delayed, is an enigma to most. Understanding a few basics, three in fact, can help open the windows and let some light on the mysterious inner-workings of mortgage lenders. Getting denied or being quoted a higher rate than you heard advertised need not be a huge question mark.


Every conventional lender, those who lend according to Fannie Mae and Freddie Mac guidelines, builds their lending criteria equal to or more stringent than the guidelines offered by those to mortgage holding giants - unless they are selling to Ginnie Mae or another mega investor. In those guidelines are some very simple first steps so important to the lending process they can be the cause for the vast majority of denials or increase costs of credit.

Whether you are applying for money to purchase a home or to refinance one you currently own these three points are crucial to your success in obtaining a good mortgage.

Number One: Employment and Income

Chances are if you skip around from job to job, especially in different industries, and you have large gaps of time between them you will be considered too high risk at least for a prime loan. Even if you have steady employment history if your income is not verifiable to the amount you need for a good debt ratio you can also be denied or incur the cost of risk in the form of a higher interest rate.

Self-employed borrowers generally need to demonstrate two full years of self-employment as evidenced by a business or professional license or other acceptable documentation. The tax returns of self-employed borrowers are usually required and the adjusted gross income, less any allowable deduction add-backs, are the accepted form of verification of income. So if you “write everything off” you may be shooting yourself in both feet when it comes to qualifying for a bank loan.

Number Two: Payment History and Credit Scores

You have probably seen the adds of mortgage companies saying “bad credit okay”. Hold on to your assets if you go to them and don’t give them an unreasonable application fee because the industry that sets the qualifications disagrees with them. This means if they are able to get you financed you’re going to pay the price one way or another. It is always better to maintain a good payment history and resulting credit scores.

Missing payments and being late on payments are two different things but neither are good. Being late on a payment is being 30 days or more late in paying. In other words if your payment is due on May1 and you make the payment on May 29 you are not considered late for credit reporting purposes. However is you do not make that payment until June 2 then you are late and that counts as one 30 day late or “one times thirty”.

Payments made late, even one times thirty, can wreak havoc on your credit scores and obviously it gives you a bad mark on your payment history. When the loan officer asks if you have been late on any payments in the last 24 months and you say no she is going to find out if you are telling the truth as soon as the credit bureau starts spitting out your last 10 years or so of payment history.

Number Three: Property Type and Purpose

Condos, log cabins and single family detached homes all present varying levels of risk to the bank. Risk is determined by historicity of repayment by similar borrowers on similar properties over the decades. Likewise a single family detached home in which the borrower is going to live is different from a single family detached home on the beach where the borrower may want to live but only spends a few weekends per year.

Commercial properties and residential properties are two completely different items in the eyes of the lender. In fact you cannot use a commercial loan on non-commercial properties and you cannot use a residential loan on non-residential properties. Each carries its own level of risk and therefore qualifications and costs of credit.

Differences Matter

Hopefully you know what your credit score is. If not you should. You should also know if your credit report contains any derogatory information such as collections, charge-offs or late payments. If you find real errors on your report you may challenge the reporting bureaus to have the lender provide proof of the reasoning they submitted for derogatory comments.

You know your income and you should know whether or not you can truly afford a home. One of the big pushes on loan officers today is to make certain they believe you are fiscally responsible enough to own a home even if you earn enough income and seem “fun to chat with”.

For any questions contact mwilkins@capitalfmc.com or http://www.themortgagemark.com/