My Real Estate Tips

Recently my friends at Liberty Mortgage Company sent me an email alert regarding the latest scams in the credit repair market.  The mortgage company receives applications every day that have some credit issues that could block the path to home ownership.  Many of the people they talk with are under the impression that their credit issues are being repaired.  Unfortunately, the applicants often have fallen for one of the many credit repair scams that set their traps for well meaning home buyers with a few credit problems. 

Mortgage loan qualification requirements are stricter today than in the past – FHA / VA and Conventional Home Loan sources are requiring ever higher FICO scores — so the average applicant may need to improve their credit report before they can qualify for a home loan.  With the pent up demand for housing beginning to show, it makes a very ripe market for scammers. 

Credit Report Credit History

Most popular scams promise to wipe your credit report clean of all the negative information.  They usually charge an up front fee, sometimes as much as $1,500 for their service.  Often all the scammers will do is dispute all the negative information on your credit report.  This is something you can do on your own for free.

Federal law requires the credit reporting agencies to investigate all disputes within 30 days.  If the agency can not confirm the negative information it must be removed from the report, however if the information is confirmed, it does stay on the report.  Many creditors do not have the manpower or resources to confirm or deny negative information back to the agency within the time limit, so the information often gets removed, even if it turns out to be true.

Another “We will fix it” scam for a fee is to tell you that they will get you a new social security number.  The idea is with a new number most credit agencies would have to start a new file under that number with your name and it wouldn’t have the negative information that may have been reported under your old SS number.

The truth is, the Social Security Administration almost never agrees to assign a new SS number to an individual who already has a file and number.  What these “credit repair” scammers are doing is filing with the IRS for an EIN (Employer Identification Number) under your name.  An EIN is a nine-digit number that looks like a social security number, but it’s actually a number assigned to a business.  This number is used by the IRS to identify companies for tax payment purposes. 

If you fall for this one, the consequences are far reaching.  By using an EIN as your SS number, you change how your income is reported to the IRS.  You’ll find it’s a big problem when you retire and the Social Security Administration has no record of your work history.  In addition you may find yourself accused of conspiring to commit fraud with possible jail time in your future.  So, be informed and don’t be a victim. 

If you want to improve your credit report and FICO score, try some of the methods I recommended in an earlier article,  Oh FICO, My FICO.  If you would like more information and instructions, plus samples of dispute letters and more, go to Credit Score Maximizer for a proven system for improving your credit – it works.

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                         or,  How to raise your FICO score

FICO — The three primary credit agencies/bureaus, Experian, Equifax, and TransUnion have a formula to evaluate an individual’s credit worthiness by arriving at and assigning a number to your credit file.  They do not give out the exact formula but do provide a lot of information on how they arrive at your (FICO) score.  The score can influence many things in your life depending on whether you have a low, medium, or high score.  The primary use is obvious, if you need to borrow money to buy a car, house, or pay your tuition for the next college session, you will need a respectable credit score.  Uses that are not so obvious are: 

Ø  If you are applying for a job, your potential employer may check your credit score.  Some feel it tells them how responsible you are about obligations.

Ø  If you need car or any other type of insurance and make application for it.  Insurance companies think it is an indication of the risk of writing a policy for you.  It can also of course tell them if you will pay your bill or not should they let you pay it over time.

Ø  If you need to rent a home or apartment your new landlord will in all probability check out your credit score along with your references to assure them you will pay the rent on time.

Ø  If you are looking for a new mate or love in your life and put yourself on the market with one or more dating/mating services, it’s more likely than not that eventually a potential mate will have your credit score checked.  Sounds cold and calculating, but with Internet resources as available as they are, let’s face it, you are going to get checked out.

So you can see that a good credit (FICO) score can be important in today’s world.

Credit scores range from 300 to 850 and your number is somewhere in between.  The minimum score most home lenders require today is 620, but for the best loan interest rate and term you will need one in excess of 720.  The higher the better is the rule.  Now if you have a FICO score below 620, you don’t  have to fold up your tent and silently steal away in the night, you can do something about it.

If you have a score below 500 it’s going to take more than just tweaking it a bit and will take more than a little time to get it above 700, but you can do it over time.  Here is the way to go about raising your credit score.

The first thing not to do — don’t pay someone money to do it, there are a number of businesses who say they will raise your credit score from 500 or so to above 700 in thirty days or less.  Unfortunately, all you will get from many is a bank account with less money and their unreturned calls and emails after you have paid $1,000 or more for their service.  There is no secret quick and legal way to raise your credit score several hundred points in thirty days.

 The following are things you really can do, and over time they will raise your FICO credit score.

Ø  Get a copy of your credit report, you can get a free one once a year from each credit bureau at annualcreditreport.com, which is a government run service for that purpose.  You can also get your report directly from any of the three major credit bureaus for a small fee.  Review the report line by line and highlight any inaccuracies, such as late payments that you believe were on time, accounts that are not yours or any negative information over 7 years old.  Write the credit agency and dispute any serious items.  They must remove them or tell you why they don’t in thirty days.  In many cases that’s all you need to do to get the negative information removed.

Ø  Stop using your major cards (Master card & Visa) and pay down the balances as quickly as you can.  You will move your score up as the differences between what you owe and your credit limit for each card grows.  Try to owe less than 30% of your limit on all your credit cards, especially the major ones.

Ø  Lately credit issuers have been reducing credit limits on cards.  That will lower your score if they do that to any of your accounts.  Pay close attention to those limits each month when you receive your bill.  If they have been lowered, call the card issuer right away and protest, asking them to reinstate your original limit, especially if you have been responsible with your handling of their card.  In many cases that is all it will take to get the limit reset.  Your alternative is that you can transfer the balance to another card or pay it off with an installment loan.

Ø  If you have one or more cards that you have charged up to the maximum limit, you may want to consider getting an installment loan and paying the balances down under 30%.  The installment loan will be treated differently on the FICO formula (more favorably) and you will have better appearing credit accounts.

Ø  Another way to increase your score is by borrowing enough to pay down your accounts by borrowing from a friend or relative.  The loan won’t show up on your report and your accounts that you paid down will raise your score.  Now don’t pay off the accounts just pay them down to small balances.  If you pay them off it will lower your score instead of raising it.  A word of caution here, make sure you can afford the extra payments using this strategy and the one above.

Ø  Don’t let your accounts go inactive with no balances, many credit card issuers are closing inactive accounts and if they do close yours it can lower your score.   Keep a small balance on the accounts to keep them active.  Remember, accounts with a balance under 30% of the credit limit on the account means a higher score overall.

Use some of the methods I’ve suggested here, pay attention to your credit accounts and maintain them by making regular on time payments, and you will be surprised at how quickly you can have a score above 720.

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