Credit FAQs
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Credit Reports
If you believe something on your credit report is inaccurate, you may want to contact the lender or company that reported the information to give you more details. Then you can either reach out to the creditor to review the information or start a dispute directly with the credit reporting agency that issued the report. The fastest and easiest way to start a dispute with the 3 credit bureaus is to create a free account and dispute online
If you're already working with Durnford Team on a mortgage, contact us and we'll get a copy of your report send over to you and we would be happy to review any questions. If you wish to get a copy of your report directly, the best place to start is annualcreditreport.com which is a free service from the 3 credit bureaus allowing you to get a copy of your current full credit report. This service will not provide you a FICO (credit) score, but typically you can pay a small surcharge directly to the bureaus for your score to provided with the report
Generally no, unless you're not using the account and there is an annual fee. Once you close a credit account, you will reduce your available credit, thereby increasing your debt-credit ratio (percentage of debt to all of your available credit), which will reduce your score.
Yes and no. Depending on how merged your financial accounts are will determine if there could be any impact during and after the divorce. If you opened any joint accounts including mortgages and installment (auto, other) loan with both your names on them then both of you assumed responsibility for the debts. This doesn’t change after a divorce proceeding. Even if your former spouse took responsibility for certain joint accounts, you still may be held accountable for outstanding mortgages, auto loans and credit card balances. So if your ex-spouse makes late payments to these debts, they’ll hurt your credit. The best way to avoid being affected by your ex’s credit standing is to pay off and close any joint accounts. In addition, creditors may let you to convert a joint account into an individual one.
Soft credit inquiries (also known as “soft pulls” or “soft credit checks”) occur when a person or company checks your credit as part of a background check. Examples of these may be: pre-screening by creditors for offers or review of your existing account; utility applications; rental applications (although likely they will do a hard pull) employer background checks; and when you check your own credit. Many lenders will also do a soft pull just before closing to insure you have not initiated new debt or made late payments since your hard credit pull when you initially submitted your loan.
Unlike hard inquiries, soft inquiries won’t affect your credit score although they may or may not be recorded in your credit report depending on the credit bureau.
Hard credit inquiries (also known as “hard pulls” or “hard credit checks”) occur when a person or company checks your credit as authorized by you during the process of applying for new credit. Hard inquiries can have an impact on your credit score depending on the type of loan shopped for and how many inquiries were generated in a short period of time. For instance, shopping around casually for a potential lower mortgage rate on a refinance will likely have no or little score impact compared to contacting multiple sources to apply for a personal loan. Examples of when a hard credit pull would occur is:
- Mortgage applications
- Auto loan applications
- Credit card applications
- Apartment rental applications
- Student loan applications
- Personal loan applications
Credit Score
Your credit score is a summary of all of your credit report's past credit information. Your on-time payment history, available credit, debt, bad credit information (lates, defaults, collections), and other credit indicators all affect your FICO score.
If one or more of the three credit agencies can't calculate a credit score for you, it implies you don't have enough credit history, and the best way to quickly establish credit is to get credit cards (secured or unsecured). However, there may be mortgage possibilities accessible if you can document your credit history utilizing alternate sources. For additional information, please contact us.
Every single time. Payment and debt information is regularly submitted to the bureaus, and your score can technically fluctuate daily depending on the number of active tradelines (credit) you have. That's why, immediately before closing, most mortgage lenders will examine your credit report to ensure no significant changes have occurred.
To acquire the best mortgage rates, you need have a credit score of at least 620+ (fair range) and preferably 680+ (excellent range). Any mortgage type will offer you the best attainable rates if you have a credit score of 720 or above. Only FHA and VA mortgages are less rate sensitive, as they are significantly more tolerant of credit issues.
No. While Credit Karma and other credit information firms provide a useful service for monitoring your credit for overall score levels and trends, the scores you receive from each site are generated using a different methodology, and scores can change significantly. While the score results will always be the same for any mortgage lender, the scores you see quoted elsewhere will generally be more weighted towards consumer credit (credit cards, installment loans) and will have different values.
Mortgage credit pulls often have no or a minor (3 point) impact on your credit score. Because mortgage credit is seen differently than consumer credit, this is the case. You can be comparing mortgages to lower your rate, and you might be speaking with many lenders at once. So, no, inquiring about mortgage choices has no or minimal impact on your credit score. Consumer credit inquiries (auto loans, credit cards) can have a bigger influence on your score because they can result in a new consumer debt loan, which will have a short-term negative impact on your score until the bureaus reflect many months of good payment history.
Most credit scoring models factor in the following five credit factors: 1) credit history (35%), 2) debt utilization (what percentage of your available credit are you using) (30%), 3) length of use (age) of each credit item (15%), and 4) new inquiries (15%) - though, with the exception of mortgage inquiries (such as shopping for the best rate), a high number of inquiries in a short period of time (credit cards) will have a larger short-term impact (10%)
Check out this fantastic Transunion guided credit report review of all of your credit report's important components.
Married couples do not share a credit (FICO) score; instead, they each have their own. When you're single, your credit habits and profile are usually all you have to worry about. When you're married, though, your credit habits and profile are influenced by your spouse's. For example, if you have credit cards, installment loans, or mortgages in both of your names and don't pay them on time, it will harm both of your credit ratings, so it's critical that you work together to ensure that all accounts are paid regularly and on time.
Mortgage Credit
The tri-merge credit report is a credit report combining the information and credit scores for each of the 3 credit bureaus (Experian, Equifax, and Transunion). Each bureau maintains its own proprietary version of your credit report meaning you actually have three reports (tri-merge) instead of just one. The 3 bureau reports generally contain the same information, although the way it’s reported and scored in each version is unique
Your tri-merge credit report combines all 3 credit bureau scores. For the purposes of a mortgage, the score used is the middle of the 3 scores. If the loan has a co-borrower, the lowest of the 2 middle scores is used
No. Different programs - different minimum requirements. Some programs, such as VA and FHA are very flexible on the minimum qualifying score, whereas other programs such as jumbo mortgages, typically require 660+ or higher. Most programs however, require a minimum score of 620 with higher scores needed for higher LTV and loan amounts
Credit scores are important, but far from the only factor. Lender underwriters will consider a range of factors on your application including income and your debt-income ratio, loan-value (LTV), available reserves (liquid/semi-liquid assets), and employment history. There are compensating factors for all applications except when the credit score is too low and below the lender's minimum cutoff
Generally no. Most credit score sites offer you a generic credit score which takes into consideration a wide range of potential new debt types you may be considering (depending on where you got your score). Mortgage credit scores are generated from specific formulas (algorithms) for each credit bureau (one model for each bureau). Therefore mortgage credit scores will always be the same no matter which broker you talk to and will typically be a little lower than popular free credit score reporting sites
Credit Repair
That depends on how much work you are willing to put in to the effort (some services guide you - and some take over the repair completely) and how bad the issues are with your credit report. But the bottom-line is that if you can make the needed changes to your credit report before a major loan such as a mortgage, the lower interest savings due to a higher credit score could be significant. Low credit scores harm you in many ways, from credit card and mortgage rates, to other approvals and even your utilities and insurance costs and reserves. So do the research, save money, and do the work yourself - or hire an expert - but repair your credit as it will save you a significant amount of money over time
The timeline for credit report correction depends on the number and type of mistakes you need to dispute. Credit bureaus have 30 days from the date they received your dispute to verify the information and delete, or verify and maintain the information. In some cases, they may request follow up information which means the process may take longer, depending on how quickly you respond. So the process can take anywhere from 1-2 months - to over a year or more for multiple and significant issues
Rapid ReScore is a neat trick available to mortgage brokers to do a short-term changes and rescore of your credit report. So if debt is paid off or down or other documentable changes have occurred to what is reported in your credit report, your credit score can be immediately rescored (at a higher score) with the new credit information.
Other Credit FAQs
A credit counseling organization can help you get your finances back in order if you’re struggling to repay debts. Many are nonprofit and will provide counseling services free of charge, but be aware that some companies hide their fees. A counselor can help you develop a budget and give you personalized advice for paying off your debts. If your finances are in worse shape and you require further assistance, a counselor can help you enroll in a debt management plan or may steer you toward debt settlement or debt consolidation programs.
When you participate in a debt management plan (DMP), you stop paying your creditors directly. Instead, your monthly payments are sent to your credit counseling organization, which then pays each bill for you. In exchange for your participation in a DMP, your creditors may lower your interest rates or waive certain fees, saving you money.
Similar to a DMP, debt consolidation allows you to combine several monthly payments into one. And like a DMP, it can also help you receive lower interest rates and fees. But this is done very differently from a DMP and can have different consequences. By consolidating with a debt consolidation firm rather than a credit counseling agency, you typically turn unsecured debt — like credit card debt — into a secured debt — one backed by property like your home or car. If you fall behind on your payments, you risk losing whatever property is connected to the debt. You may lose your home to foreclosure or your car to repossession. It’s especially important, therefore, to make sure you can afford monthly payments before you consolidate your debts.
A successful debt settlement directly reduces the amount of money you are required to pay your creditors. You or a debt settlement firm will negotiate with your creditors and attempt to persuade them to reduce what you owe. Creditors have no legal obligation to consider settlements, so there is no guarantee that the settlement firm will be successful.
All or most of your debts can be discharged in bankruptcy. The overall sum is determined by the kind of bankruptcy as well as the types of debt. When you file for bankruptcy under Chapter 7, all or most of your debts will be discharged immediately. It won't wipe out some student loans, current debts, or debts accumulated as a result of deceptive practices. If you apply for Chapter 13, you'll have to pay back a percentage of your obligations over a three- to five-year period. The remaining liabilities will be waived if you successfully complete the payment plan.