Data Facts Blog


STOP! Don’t Mess Up Your Home Mortgage!

approved mortgageYou’ve gone to your lender and been approved for a home mortgage.  You’ve found the home of your dreams.  But just when you are about to close, the lender says you are no longer approved.  What happened?

Since the infamous “mortgage meltdown” a few years back, lenders as well as industry regulations have gotten much stricter.  The latest tightening of the screws comes from Fannie Mae. The mortgage titan’s Loan Quality Initiative, which went into effect June 1, requires lenders to track “changes in borrower circumstances” between application and closing.  While these rules aren’t new, Fannie is enforcing them more vigorously.

The new rules simply want to ensure the new home loans are deemed “low risk” for default or buyback.  Basically, lenders want to be assured that this is the type of borrower that has the ability to repay this loan in full.  With the increase in regulation and scrutiny over any changes, even seemingly small changes can implode your pending mortgage.

Following are three things borrowers can do to mess up their next mortgage closing.

Get a new credit card or auto loan

Get a new credit card or auto loan, and you could find yourself no longer approved for that mortgage loan.

Lenders have long admonished mortgage applicants to avoid getting new credit cards and auto loans while home loans are in underwriting. Fannie’s Loan Quality Initiative adds urgency to this request.

For example, picture a borrower who gets a car loan a week before closing on the mortgage. The mortgage lender doesn’t know about it. Later, the borrower misses a couple of mortgage payments.

Fannie Mae can look back, discover the undisclosed auto loan and make the lender buy back the bad mortgage. That’s a money loser for the lender.

So at the eleventh hour, most lenders check credit for new accounts.

Even merely opening an account — without charging anything to it — can be a mistake.

Charge up credit cards

Charging up credit cards with thousands of dollars’ worth of appliances, tools and yard equipment is another surefire way to muck up a closing. It’s best to leave those cards alone.

Don’t increase your credit card balances at all. Mortgage approval is based partly on debt-to-income ratio.  The lender looks at the borrower’s minimum monthly  debt payments and compares them to income. If the ratio of debt payments to income is too high, the borrower could be turned down for a mortgage.

Fannie encourages mortgage lenders to recalculate debt-to-income ratios just before closing. If a spending spree sends the debt-to-income ratio too high, the mortgage could be doomed. For this reason, borrowers should wait until after closing the mortgage before buying furniture, a refrigerator or a lawn mower on credit.

Change jobs

Changing jobs is another good way to derail a mortgage before closing. Other potential deal-breakers include staying with a current employer, but switching from a salaried position to one where primary income comes from commissions or bonuses.

Any slight change in income could cause you to not qualify.

The main thing to remember is, keep everything exactly the same as the day you got approved.  No new car.  Don’t apply for a credit card so you can get brand new furniture.   And definitely don’t change your job.

Getting Married? How Marriage Affects Your Credit

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Today, February 14th is the most romantic day of the year.  In fact over 2.2 million people will get married today and millions more will become engaged.    Getting married is a wonderful moment in life, but it can affect many things, including your credit.  So in the spirit of the holiday that love built, we’ve decided to debunk some credit myths associated with marriage, and its effect on credit. 

 

Our Credit Reports MERGE TOGETHER When We Get Married

Many people mistakenly believe that getting married means that your credit also gets hitched. That’s not true because you never share, inherit, or merge credit histories. Marriage has no affect on your credit score even if you take your spouse’s last name or live in a community property state. Everyone has their own credit report and credit scores.

If you have joint account—such as a credit card, car loan, or mortgage—with a spouse (or anyone else) the account history appears on both of your credit reports. But if you have a credit account in your name only, it never appears on your spouse’s credit file.

 

If My Spouse Has BAD Credit So Do I

Marrying someone with bad credit doesn’t affect your credit (unless your name is added as a co-owner on a delinquent credit account), but it can hinder your ability to get credit as a couple.

For instance, if you apply for a mortgage or car loan that requires both of your incomes to qualify, the lender will review both of your credit histories. Having a spouse with poor credit could cause your joint application to be declined or require you to pay a relatively high interest rate on a loan.

 

My Credit History Is ERASED When I Change My Last Name

If you change your name after you are married and report this change to your creditors, you will see some updates to your existing credit reports. Along with your old name, your new name will be listed as an alias. You will not have to start from scratch with a new credit history. There may be a few inaccuracies on your report as this transition takes place, so it’s important to check your credit report frequently during this period.

 

I Will AUTOMATICALLY Become A Joint User On My Spouse’s Accounts

Marriage doesn’t automatically make you an authorized user or co-signer on your spouse’s accounts. If you wish to be added to your spouse’s credit cards, you will need to call the creditors with this request. Please note that being added as an authorized user will not result in the account being factored into your credit score. As for loan accounts, becoming a co-signer for a loan usually requires refinancing.

 

Before getting married, make sure there is complete financial transparency. Understand your partner’s debt situation and credit history so you address any negative issues and increase your chances of living happily ever after.

 

8 Ways to Build a GREAT Credit Score

Posted in Uncategorized by datafactssolutions on February 6, 2014
Tags: , ,

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Establishing a good credit history has never been as important as it is today. It’s not just that you’ll need good credit to get decent rates when you’re ready to buy a home or a car. Your credit history can determine whether you get a good job, a decent apartment or reasonable rates on insurance. One seemingly minor misstep — a late payment, maxing out your credit cards, applying for too much credit at once — can haunt you for years. If you’re just starting out, you have a once-in-a-lifetime opportunity to build a credit history the right way. Here’s what to do, and what to avoid.

 

Check your credit report

You’ll first want to see what, if anything, lenders are saying about you. That kind of information is contained in your credit report at each of the three major bureaus: Equifax, Experian and Trans Union. Credit reports are used to create your credit score, the three-digit number lenders typically use to gauge your creditworthiness. Lenders also may look at the report itself, as may the landlords, employers and insurance companies who use credit to evaluate applicants.

 

Establish checking and savings accounts

Lenders see these accounts as signs of stability. Opening checking and savings account is also one of the few things you can do as a minor to start building a financial history. While you can’t get a credit card in your own name until you’re 18 and can be legally held to a contract, many banks have no problem letting you open an account. Many, but not all. If your bank balks, you need to either look around for another bank or consider opening a joint account with an adult.

 

Understand the basics of credit scoring

You need to know that the two most important factors in your score are:

  • Whether you pay your bills on time.
  • How much of your available credit you actually use.

It’s essential that you pay all your bills on time, all the time. Set up automatic payments or reminder systems so that you’re never, ever late. All it takes is a single missed payment to trash your credit score — and it can take seven years for the effects to completely disappear. You also don’t want to max out any of your credit cards, or even get close. Keeping your credit use to less than 30% of your credit limits will help you get the best possible credit score. Finally, you don’t need to carry a balance on a credit card to have a good credit score. Paying your bill off in full is the best way to keep your finances in shape and build your credit at the same time.

 

 

Apply for credit while you’re a college student

It turns out that there’s no easier time to get a card than while you’re a college student, but you must proceed with caution.  Look for a card with a low or nonexistent annual fee and low interest rates. For now, just get one: Opening a slew of credit accounts in a short period of time can make you look like a risky customer.

 

 

Apply for a secured credit card

If you can’t get a regular credit card, apply for the secured version. These require you to deposit money with a lender; your credit limit is usually equal to the deposit. You’ll want to screen your card issuer carefully. Some charge outrageous application or annual fees and punitively high interest rates. Your credit union, if you have one, is a good place to start looking for a secured card.

Ideally, the card you pick would:

  • Have no application fee and a low annual fee
  • Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments
  • Be reported to all three credit bureaus – If it doesn’t, the card won’t help build your credit history.

 

Get a finance company card

Gas companies and department stores that issue charge cards typically use finance companies, rather than major banks, to handle the transactions. These cards don’t do as much for your credit score as a bank card (Visa, MasterCard, Discover, etc.), but they’re usually easier to get.

 

Get an installment loan

To get the best credit score, you need a mix of different credit types including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans, mortgages). Once you’ve had and used plastic responsibly for a year or so, consider applying for a small installment loan from your credit union or bank. Keeping the duration short — no more than a year or two — will help you build credit while limiting the amount of interest you pay.

  

 

Use revolving accounts lightly but regularly

For a credit score to be generated, you have to have had credit for at least six months, with at least one of your accounts updated in the past six months. Using your cards regularly should ensure that your report is updated regularly. It also will keep the lender interested in you as a customer. If you get a credit card and never use it, the issuer could cancel the account.

 

Just remember the credit tips mentioned earlier:

  • Don’t charge more than 30% of the card’s limit.
  • Don’t charge more than you can pay off in a month. As mentioned earlier, you don’t have to pay interest on a credit card to get a good credit score, and it’s a smart financial habit to pay off your credit cards in full each month.
  • Make sure you pay the bill, and all your other bills, on time.