Credit Help

Do you need assitance removing negative items from your credit history? If an item can go on a report, it can come off too- no matter what it is. Follow this link for more information on Credit Restoration.

Credit Scores

Understanding how to use your credit scores and learning how lenders and banks utilize them when considering your loan can be very empowering.

Following the links below will help you to review the basics of credit and how lending institutions use it, what you can do to build or rebound your credit and keep it strong, and finally what you can expect from us with your personal credit situation.

| Credit 101 | Protect Your Credit Scores | Myths on Credit Repair |

---

Credit 101

Your credit rating is a measure of your credit-worthiness that considers your reputation for paying back money. The credit bureau handles information on people's use of credit. It provides your credit history which is a list of facts about how you handle debt. This information is gathered from financial institutions, retailers and other lenders. Most of your credit information remains on your file for seven years. The ranking they give you is called your "credit rating." For more information on this topic and to see how you can monitor the credit reporting agencies reports on your personal credit information click here to visit MyFico.com.

When you're looking for a new mortgage or a home equity line of credit, like many lenders, Balboa Mortgage evaluates your credit based on the "Three C's."

Credit

Is it likely that you will repay the loan? Are your payments on time and up-to-date? Are you financially stable and reliable?

Capacity

Are you able to pay the loan? What kind of outstanding debt do you have? Do you have enough earning power and net worth to repay a mortgage or home equity line of credit?

Collateral

Do you own something of value that can be promised to the lender if you don't repay the loan?

There are a few more factors mortgage lenders look into when evaluating your capability of obtaining a loan. To confirm your responsibility and stability they may examine:

• Your monthly income
• Occupation and length of time with employer (two or more years is ideal)
• Homeownership status and history
• How often you move or have moved; patterns of behavior and the timing of that behavior
  

And there are other examples, such as, if you had a charge-off (when the creditor sells your debt to a collection agency) in your credit file from several years ago and you've been able to maintain your credit over the years, you will be judged differently from someone who recently had a charge-off.

Whatever the case is, it's imperative to get off on the right foot when building your credit . It is important to establish good credit behavior as early as you can in order to build a solid credit reputation. See Protect Your Credit for some helpful tips.

Essentially, credit bureaus will look for five main characteristics when determining how high your credit score will be.

In descending order, they are:

1. Past delinquency. If you have failed to make payments in the past, lenders fear you will repeat that behavior.
2. How your credit has been used. Have you maxed out or spent close to the limit on a credit card? If so, then you may be considered a greater risk than someone who is more conservative with his or her credit line. Do you pay off your bill every month or a keep a revolving balance?
3. Your age. The scoring models can judge each individual separately. Thus a 20-year-old's credit history would not be compared to a 45-year-old's credit history.
4. Frequency of credit inquiries. It is recommended that you check your credit once a year. Creditors' requesting reports several times in a short period may send a signal that you are applying for a lot of credit due to financial difficulties, or that you are taking on too much debt and overextending yourself.
5. Your credit variety. It is best to have a mix of installment and revolving loans (e.g., auto, credit cards, retail, etc.). On installment loans, a person borrows money once and makes fixed payments until the balance is gone, while revolving borrowers make regular payments, each of which frees up more money to access.

| Credit 101 | Protect Your Credit Scores | Myths on Credit Repair |

---

Protect Your Credit

Building Good Credit and Keeping it There

No one is perfect; the credit system that financing institutions use can be very frustrating at times. The bottom line is it is important to check your credit at least once a year to make sure it is all accurate. If you have tarnished credit or just no substantial credit developed to date, or you would like to keep your credit healthy, follow these rules in managing your credit:

Your credit should be an "A", or at least a 680 FICO score, if you have five or six solid pieces of seasoned credit (i.e., auto loan, mortgage, credit card, etc.) that are at least two years old and indicate no late payments. Many underwriters understand that your credit can't always be perfect; therefore they can usually excuse a few minor mistakes. These may include up to two credit card payments that were 30 days late, or one installment payment (auto or student loan payment) that was 30 days late. However, no payments of any kind should be more than 60 days late, and no mortgage or rent payments should be late at all. There should also be no outstanding debts resulting in judgments or liens .

Checking & Savings Accounts
Try to open both accounts, even if your balances are low. Lenders will look for a financial history and having both of these accounts will improve your credit rating. Naturally, the more you have in savings and investments, the better your chances are for a loan approval, but keep in mind that it's okay to start small.

Stable Address
Keeping the same address for two or more years will show lenders that you have stability in your life. This makes you reliable and less of a credit risk, increasing your chances of getting a better loan. College students, due to their frequently changing addresses, are given a little more latitude.

Income
Lenders carefully weigh how much you earn and how long you have been with your present employer against how much you owe (your debt ratio). If your debt ratio is too high, it may negatively affect your loan application. However, if you have proven that you can make your monthly payments on time, lenders will usually be more accommodating to your financial requests.

Credit Cards
Be aware of the risks involved when you use credit cards. Don't accumulate too many - start small. Begin with a retail card and pay off the balance in full each month. As you begin to demonstrate your financial responsibility, apply for a major brand name card or a secured card. See Credit Limits below for more useful guidance using credit.

Secured Cards
If you are just starting out, or trying to rebuild your credit rating, you may want to consider applying for a secured card. Some banks will ask you to deposit an amount (usually between $100 to $1,000) to use as your credit limit. The bank will then issue you a Visa® or MasterCard®. The deposit assures them you will honor your debt. If you don't, the bank will most likely confiscate your deposit. Be sure to ask about rates and potential application and processing fees, and if such fees will be refunded if your application is denied.

Low-Rate Credit Cards
Virtually everyone needs at least one credit card these days, and the best kind to get is a low-interest/no or low annual fee rate card. If you have more than one card, it may be a good idea to transfer your balances onto the one with the lowest rate. You'll have fewer bills to pay each month, and you can take advantage of the lower rate. But using one card can get risky because the rate may rise unexpectedly. Often you'll start with a low introductory rate, but after six months the rate will increase to the average credit card rate, which is significantly higher. Pay attention to your monthly statements and if the rate increases too much, shop around for a better deal. If you have been making your payments on time, you should qualify for a lower rate.

If you do choose to transfer your balances to one card, be aware that the amount you transfer may be charged interest at the low rate, but any new debts you charge may be financed at the standard credit card rate. Check with your bank first and also ask how long the low rate will last.

Remember that some credit card companies will impose a monthly fee in exchange for a low rate. However, if you are in good credit standing, you may qualify for a low-rate card without having to pay the fee. American Express® is one company that charges an annual fee, but has a zero interest rate. The catch? You must pay your balance in full each month.

Late Fees
Late fees are important to avoid and doing so is an excellent method for increasing your credit standing. Late fees are becoming more and more popular and can cause your effective interest rate to rise dramatically. Be sure to read the fine print and ask your card issuer questions.

Credit Limits
Don't let your credit limits get too high because a large line of available credit means you are capable of spending a great deal. There is some ambuguity as to what "too high" is; however you start to follow this general rule by trying not to spend or use more than about 30% of the high credit limit as a general rule of thumb.

What this means then when you apply for credit and need, say $5,000 line of credit, try getting a line of credit for acutally $16,000. If getting that much is not available with one line of credit, try splitting it up with a few: get three lines of credit at $5,000 where you only plan to use $1,700 on each.

Now, back to the original issue of having "too high" of a credit limit. If you only ever need about 5% of the credit limit, you might consider getting it reduced so that you end up using about 30%. If you do voluntarily reduce your limit, make sure the credit bureaus do not report it as a creditor enforced action, which would look negative on the trade line report.

Closing unused accounts could be detrimental to your credit rating, despite reason and common belief if done too early. It is best to keep an account that you plan on closing with a balance of $0 for two years before actually closing it. It sounds strange, but if you close an account that you had activity on, and then suddenly request it closed, it may be a sign to the creditor that you could not manage the line of credit signaling possible distress signs.

Another trick that could work in your best interest is to request about every 6 months to a year that your credit limit is raised. This way you can more easily only use 30% of the credit limit. By raising it and keeping your balances within that limit you are telling the creditor that you are responsible and can manage the reponsibility.

Credit Inquiries
An inquiry is generated when a creditor obtains your credit report (such as when you apply for a credit card). Inquiries typically remain on your credit report for two years. Therefore, by running unnecessary reports, you send out a signal that others are looking into your credit history. Try to avoid unnecessary credit checks. If a large number of inquiries occur in a short period of time, lenders may think that you either are overextending yourself by taking on more debt than you can actually pay back or are applying for more credit because of financial difficulty.

Judgments & Liens
If your property has a lien on it (which can legally be sold to another party) or if a collection agency has contacted you, it is likely you will be considered a high-risk borrower.

Dispute Your Credit Reportings
If you need to dispute credit inaccuracies on your report you will need to file an investigation with the corresponding bureau (i.e. Equifax, Experian, TransUnion, Innovis). The best and most sure way of going about this is contacting the institution that may have reported the wrong information to the credit depository. If you can get a letter from them (always make sure you get things in writting), you should include that with your file for an investigation to have the item corrected.

If the creditor is not available, will not cooperate, or is out of buisness, you will have to file the investigation without their assistance. If you have other documentation available that backs up your request the likelihood of getting the bureaus to cooperate is much higher.

Still, if all else fails, even after sending in your own requests for investigations, it might be in your best interest to higher a practice that specializes in restoring credit history and ratings. Follow this link for more information on who you can trust to assist you in this process.

| Credit 101 | Protect Your Credit Scores | Myths on Credit Repair |

---

Myths on Credit Repair

10 Myths of Credit  

• Myth #1 -Paying off past-due accounts
• Myth #2 - Negative marks removed come back
• Myth #3 - Some negative listings can't be removed
• Myth #4 - Disputing credit is easy to do by yourself
• Myth #5 - Bankruptcy makes credit repair easier
• Myth #6 - The 100-word statement option is useful
• Myth #7 - I can make a brand new credit file and fool the credit bureaus
• Myth #8 - Enough good credit offsets poor credit
• Myth #9 - Consumer Credit Counseling can help my credit
• Myth #10 - It is illegal to remove accurate data from my credit file

 

Myth #1 - When I pay off a past-due account, such as a charge off or a collection account, it will show "paid" and will no longer affect my credit scores.

It is quite difficult to raise your credit scores without somehow satisfying your outstanding debts, however, the act of paying off a debt can actually lower your credit scores. Negative credit is allowed to stay on the credit report for a maximum of seven years, except for bankruptcy, which may remain on the credit report for ten years. This seven-year clock begins ticking on "the date of last activity" or in other words, when the last action took place on the account. By paying an outstanding, delinquent debt you will change the account status to "paid collection," "paid was late," or "paid was charged off" which will still stand out as a very negative listing, substantially lowering your scores. Furthermore, you will create a new date of last activity on the day you settle the account. The seven-year clock will reset and begin all over again. When you have outstanding debt, it is almost always prudent to seek professional help so that you may settle your debts without further lowering your credit scores.

Myth #2 - If I succeed in raising my scores by having a negative item deleted from my reports, it will just come right back on my credit report, thus lowering my scores again.

The credit bureaus have cleverly spread this myth through the news media and government agencies. In truth, the credit bureaus will often temporarily delete a negative listing if they haven't heard from the credit grantor after approximately thirty days. If the credit grantor reports late, say after six weeks, then verifies the negative listing the credit bureau will often reinsert the negative listing on the credit report. Usually, though, the creditor simply fails to respond and the negative listing is permanently deleted. If the credit grantor verifies the item, either before thirty days or after, the account may still be challenged again at some future time.

Myth #3 - There are negative listings, such as bankruptcies and foreclosures that are impossible to remove from the credit report.

There are no types of negative listings that cannot be removed from a credit report. Negative items such as bankruptcy or unpaid debts are certainly more difficult to remove and can have a greater, negative impact on your credit score. This has more to do with the operational systems of the credit bureaus than the negative impact the item has on your credit scores. For example, judgments and tax liens can have a substantial, negative impact on your credit scores but they are at times easier to remove.

Myth #4 - Disputing the credit report is easy and any consumer can do it himself for the price of a few postage stamps.

Disputing the credit report is easy but getting results from the credit bureaus can be difficult, complex, and frustrating. It is no coincidence the Federal Trade Commission receives more complaints against credit bureaus than any other type of business. Remember, the credit bureaus are primarily interested in protecting their profits. Investigating your challenge consumes these profits. The credit bureaus seem to do everything in their power to make it difficult for consumers to improve their credit scores. Improving your credit scores by yourself is like repairing your own transmission or representing yourself in court; it is possible, but you must decide if you are willing to take the time and assume the risks of doing it yourself.

Myth #5 - If I declare bankruptcy, I can begin my credit report all over with a clean slate.

Many bankruptcy attorneys do not adequately understand or explain the effects of bankruptcy to their clients. Stated simply, bankruptcy is to an individuals credit score what the nuclear bomb is to war. When you file for bankruptcy, every credit account that you decide to include in bankruptcy will become an "included in bankruptcy" account. Additionally, a bankruptcy filing and bankruptcy discharge listing will appear in the court records section of your credit report. Because so many negative items are attached to the bankruptcy, it becomes very difficult to raise your credit scores. If at all possible, you should avoid bankruptcy.

Myth #6 - If you are not satisfied with the results of your credit bureau challenge, you may file a "100-word statement" on your credit report explaining your side of the story. Creditors will read your statement and will take it into consideration.

No known creditor considers information given in a 100-word statement. The statement only serves to verify some of the negative listings on the credit report. Make 100-word statements the first things you delete from your credit file. 100 word statements do not affect your credit scores.

Myth #7 - By changing numbers in my social security number or by using an EIN tax number, I can fool the credit bureaus into creating a completely clean, new credit file under my name.

This scheme has proven to be complex, difficult, and illegal. Lying about any personal information on a credit application is usually a criminal offense. Using these "file segregation" schemes requires an enormous amount of coordination, not to mention personal risk.

Myth #8 - If I build enough good credit, it will offset my bad credit and raise my credit scores. After all, I was only late a couple of times.

Any amount of bad credit is devastating to your credit scores and will reduce your chance of being approved by a credit grantor. Most credit grantors never actually look at your credit report. A computer pulls your credit report and assesses the risk factors inherent in your report. There are several hundred identified risk factors. The computer then assigns a credit score which determines whether your will be accepted or denied. Even one or two slow pays can trigger a credit card or personal loan denial. The slightest amount of negative credit will cause the interest on an auto loan to skyrocket. You will probably find that even a little bad credit, regardless of how much good credit you have, will reduce your scores to the point of being denied credit.

Myth #9 - If I'm having trouble paying my bills, I can go to Consumer Credit Counseling Service and they will help me to restore my credit.

Consumer Credit Counseling Service or CCCS is a nonprofit debt counseling service that assists consumers who are over their heads in debt. CCCS is funded and controlled by the credit grantors and the credit bureaus. Often, CCCS provides a beneficial service to the consumer. Because of the obvious allegiance between CCCS and the credit bureaus, you cannot reasonably expect CCCS to do anything that the credit bureaus would frown upon; such as help you improve your credit scores. In fact, if you decide to leave CCCS before you have finished their program, they can list your failure to complete the process as a negative listing on your credit report. When you are participating in the CCCS program, your creditors will often note it on your credit report. The fact that you resorted to a debt-counseling program is a huge red flag for prospective credit grantors and will have a negative impact on your credit scores. Remember, paying off your debts is a step in the right direction, but it does not restore your credit.

Myth #10 - It is illegal for creditors to take a negative, accurate listing off my credit report. The law requires that these items remain on the credit report for at least seven years.

When you speak with credit grantors, collection agencies, or credit bureaus, their typically under-educated staff may tell you all manner of such pseudo-legal nonsense. The law demands that negative listings appear on your credit report for no longer than seven years. The credit grantor or the credit bureau can choose to delete the negative credit listing whenever they see fit.

| Credit 101 | Protect Your Credit Scores | Myths on Credit Repair |