From Data Facts: 5 Things Not to do After You Apply for a Mortgage

Buying a home can be one of the most stressful adventures a person can embark upon. From choosing the home, negotiating the price, obtaining a mortgage loan, to securing ownership, there are many pitfalls that can derail the plan.

Consumers often mistakenly believe that it is clean sailing after the mortgage loan process has been started. If the credit score it good, they are good to go, right. Wrong.

There are negative actions that can be taken even after the mortgage loan has been applied for that can decrease or annihilate the chances of getting that loan closed.

Today we are going to discuss the 5 No-No’s. These are the actions that a consumer needs to AVOID after applying for a mortgage loan.

#1: Don’t charge new credit card debt. In many cases, the mortgage loan was narrowly secured based on the consumer’s debt ratio or credit score. In these instances, even a few hundred dollars in new debt can cause the ratios to swing out of favor or credit scores to drop.  Postpone any new purchases on credit. Opt instead to pay cash.

#2:  Don’t quit your job.  The mortgage loan will be figured on your (and maybe your spouse’s) income. Your employment status will be checked again before the loan closes, and if the bank finds out you are unemployed, the mortgage loan will most likely fall through. Quitting your job is one of the most surefire ways to spoil the mortgage loan process.

#3:  Don’t buy a car.  If you get car fever during your mortgage process, REFRAIN from acting on it. A car loan will show up as a new inquiry on your credit report, AND the debt could possibly skew your debt ratios enough to mess up your chances of closing on your mortgage. Trust me, a car is not worth losing your dream home.

#4: Don’t miss payments. Forgetting to pay a bill or paying it late has a tremendously negative impact on a credit score. Just one late payment could tank your credit score to the point that the new mortgage would be unattainable. Practice diligence in paying your bills on time, especially when trying to obtain a mortgage.

#5: Don’t pay off old collections. It is a common misconception that “cleaning up” your credit by paying off old collection will help you look better to creditors. This is often not the case. By paying off an old collection, the date of last activity (which is how the credit scoring model looks at collections) will be brought to the present. The old collection will look like it just happened, which could result in a credit score drop of 100 points or more!  Leave old collections alone, and only pay them at closing, if required.

Securing a mortgage is a big endeavor. It takes lots of time and energy. Be sure to avoid these 5 common pitfalls to ensure you get the mortgage you want!

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

4 Tips for Reviewing Your Credit Report

You have probably read the advice everywhere:  CHECK YOUR CREDIT REPORT!  However, what does that really mean? What are you supposed to be checking?

While pulling your credit report at least once a year is very good advice, a person needs to know what to look for when reviewing their information. Start with these tips to make certain you are making the most out of the credit report:

1: Check out identifying information. Look over the names, addresses, and social security numbers appearing on the credit report. While slight misspellings are common, alarms should sound if an entirely different name or address is associated with your social security number, or if there are multiple social security numbers showing up on the report.

2: Examine the creditors. All tradelines of credit should be reviewed closely. Note any creditors that you are not familiar with. Also review the balances on each account, looking for discrepancies.

Another important piece of information that is in the creditor tradelines area is joint or individual account information. This tells you if you are the only one on the account, or if you share it with another person.

3: Note any late payments. Accounts showing late have the single biggest impact on your credit score. The date of the late payment should be reviewed to see if the account really was paid late, or if the late was reported in error.

4: Review all public records: Serious financial missteps such as bankruptcies, foreclosures, collections, and tax liens will show up in this section. Go over these closely to see if any of the items are reported in error.  If you have relevant public records in this section, make certain the dates are reported correctly.

The hope when assessing your credit report is that you will find no surprises.  That is not, however, always the case. Various reports have found that up to 25% of credit reports contain errors.

What should you do if you find errors on your credit report?

Contact the bureaus. Write all 3  bureaus (either on their website or by mail) and tell them about the error.  Send copies of any documentation that backs up your claim.

Notify the creditor. Send the creditor a letter saying that you dispute the item, along with copies of documents that give evidence to your claim.

Follow up. The credit bureaus have 30 days to investigate your dispute. They will then contact you to give you the outcome.

Implementing these tips can help you understand your report, catch any errors or mistakes, and assist you in staying on top of your reported credit history.  Pulling and reviewing your credit report once a year is an important aspect of maintaining a successful financial life.

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

Social Security Numbers and Mortgage Fraud

The social security card looks like an innocent little thing. However, its 9 digit number packs a powerful wallop during the mortgage process.  People who commit mortgage fraud often attempt to utilize other people’s socials to acquire mortgage loans.

According to Fannie Mae’s Fraud Finding Statistics , for the 2011 and 2012 mortgages where misrepresentations were discovered,   8% of the misrepresentations involved social security numbers. This, unfortunately, is an increase from 2010.

Mortgage fraud is a rampant practice in today’s real estate climate, with fake or stolen social security numbers often at the heart of the scams. Fraudsters have several ways of gaining access to a person’s social:

1: Purse or wallet snatching: a thief may utilize this very common practice to gain access to a consumer’s private information.

2: Phone scams: fraudsters call a person with a phony story. Examples of this are scammers telling the person he/she has won a great amount of money, or posing as the person’s bank or credit card companies. In these cases, thieves ask for identity verification in the form of a social security number.

3: Computer hacking: websites where private information is stored may be hacked in order to retrieve social security numbers.

Once fraudsters have secured a valid social security number, they can utilize it to open credit cards, get hired for jobs, AND obtain a mortgage.

Criminals who set their sites on mortgage fraud often set up complex networks and intricate scams to commit mortgage fraud. One person will steal the social security number, while another fraudulent person applies for the mortgage. A group working this way can rack up tens of thousands of dollars in cash without the consumer’s knowledge.

How can consumers protect themselves?

–          Leave it at home. Never carry your social security card in a purse or wallet. This practice will eliminate the possibility of a thief stealing it in a purse or wallet snatching incident.

–          Guard the number closely. Only give out the number on a call that you initiated.  Beware of anyone calling or emailing you asking for your social security number.

–          Report a theft immediately.  If you feel your social security number has been compromised, report it to the FTC, the 3 credit bureaus, and the Social Security Administration immediately. Doing damage control up front will save you big headaches down the road.

How can mortgage lenders protect themselves?

–          Closely check the credit report. Scour it thoroughly for any discrepancies in the applicant’s social security number.

–          Run a social security verification on every borrower. For added protection, this process makes certain the social matches the person trying to obtain the mortgage.

It’s a sad fact of life there are criminals out there who prey on honest people by fraudulently acquiring their social security number. However, by being vigilant (whether you are a consumer or a mortgage lender), these criminals can be thwarted and the incidences of mortgage fraud can be decreased.

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

The Sticky Truth about Collection Accounts

Collection accounts can be a huge headache for consumers, and can wreak havoc on a credit score.

Debt collection in the United States is estimated to be a 12 billion dollar industry.  The way it works, in a nutshell, is when an account becomes overdue to the point the creditor does not think they will get their money, they sell the debt to collection agencies for pennies on the dollar.  The collection agency then attempts to recover what is owed.

Dealing with collections:

If a consumer has a debt sent to collections, he should receive a letter from the collection agency notifying him of the situation. If the collection is an error (reported incorrectly, or is not the consumer in question), he should contact the collection agency immediately to resolve the matter.

However, if it is a true collection, the consumer does have rights afforded to him under the Fair Debt Collection Act.

1: The collector cannot threaten you.

2: You can request the collector to not contact you, or only contact you by mail

3: A collector may not contact you before 8 in the morning or after 9 at night

3: The collector cannot tell you that you owe more than you really do

4: They may not publish the names of people who will not pay them

5: They are also not allowed to misrepresent themselves as credit reporting companies, attorneys, or government officials.

Once a person determines that the collection is valid, there are a couple of avenues to explore:

–          Pay the collection. A consumer may choose to negotiate with the collection agency and pay the balance of the collection. In this scenario, the consumer needs to MAKE CERTAIN that the collector sends all offers in writing.

–          Not pay the collection.  Deciding to not pay a collection may result in the collection agency suing the consumer. If the agency wins, the consumer’s wages may be garnished to repay the debt.

Unfortunately, either way negatively affects your credit score. Once a collection has been reported to the credit bureaus, it remains on the report for 7 years, whether or not the debt is paid off.

And, beware of paying old collections! Sometimes, consumers will mistakenly believe that paying off a collection account that is several years old will help to increase their credit score, and this is not the case. Paying off an old collection brings the date of last activity to the present, and the effect of the collection is felt all over again (which usually means the credit score drops).

A good rule of thumb is to try your very best to stay current on your payments. If you fall behind, strive to not let the account go into collections. If you do end up with collection accounts, be prepared to deal with collection agencies, and brace yourself for a credit score drop.  Once a collection hits your credit report, managing your other credit accounts wisely is the best way to rebuild your credit score.

(For more information on collection accounts and consumer’s rights, read the FTC’s Debt Collection FAQ’s).  

 ~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

From Data Facts: A Quick Check of Your Compliance Standards

Red tape, bureaucracy, paperwork!  Whatever you want to call them, compliance rules and regulations can be time consuming and confusing.

However, complying is very important, and should be a top priority. The penalties for non-compliance are just too stiff to ignore.  Here are a few tips to help make sure you (as a mortgage lender) are in compliance with federal and state regulations. *

Befriend the FCRA:

The Federal Fair Credit Reporting Act regulates the operation of consumer reporting agencies, and also affects you as a user of information. It regulates how a consumer’s information may be used, and restricts who has access to this sensitive information.   In order to be in compliance, one needs to have a thorough understanding of the FCRA.

Store your paperwork:

The Federal Equal Opportunities Act states that a creditor must preserve all written or recorded information connected with an application for 60 months. In keeping with the ECOA, Data Facts, Inc. requires that you retain the credit application and, if applicable, a purchase agreement for a period of not less than 60 months.

 Properly dispose of sensitive information:

As part of the Fair Credit Transaction Act of 2003, if a consumer report is being used for a business purpose, it is subject to the Disposal Rule.   This rule calls for the proper disposal of information in consumer reports and records to protect against “unauthorized access to or use of the information.”

Guard your emails:

Email hacking is becoming more and more prevalent. Periodically review how your organization is using email to exchange information. Make sure sensitive information that is being sent via email is protected by using Winzip password protection, and by never sending social security numbers in the body of the email.

Have a plan for a breach: 

If you have not already done so, establish processes and procedures (in a written plan) for responding to and containing security violations, unusual or suspicious events and similar incidents. The goal should be to limit damage or unauthorized access to information assets and to permit identification and prosecution of violators.

 Know your state laws.

Certain states have passed restrictions in addition to the FCRA. Make sure to be familiar with any additional laws in your state, and follow these rules carefully to maintain full FCRA compliance.

 Maintaining compliant procedures and processes is an integral part of doing business in the mortgage industry.  By taking the time to become comfortable with the laws and regulations, you will be better able to protect yourself and your business from lawsuits, fines, and penalties.

*(This is not intended to provide legal advice. You should consult your own company’s Human Resource and Legal departments and/or obtain legal advice).

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

April is Financial Literacy Month: Numbers and Websites You Should Know

In the spirit of Financial Literacy Month, Data Facts has compiled a list of very important numbers and websites for consumers.

Ta-Da!

To obtain a credit report:

www.annualcreditreport.com This site allows you to request a free credit report from all 3 bureaus once every 12 months. Call 1-877-322-8228 to order the report by phone.

To get on the Do Not Call List:

 Call 888-382-1222 from the phone you wish to register, or go to www.donotcall.gov . Due to the Do Not Call Improvement Act of 2007, phones that are registered will remain on the list permanently (previously it expired after 5 years).

To opt out of mail solicitation and pre-screened offers:

 Call 1–888–567–8688  or visit  www.optoutprescreen.com . You are able to opt out electronically for 5 years. To opt out permanently, you will need to print out the form and mail it in.

To contact the Credit Bureaus:

Equifax: Call 800-685-1111 or visit them online at www.equifax.com
Experian: Call 888-397-3742 or www.experian.com 
Transunion: You can reach them at 800-888-4213 or www.transunion.com  

To create a letter disputing errors on your credit report:

Under the FCRA, both the credit reporting company and the information provider  are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the credit reporting company and the information provider. Visit http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm for a sample dispute letter.

Other important numbers to have on hand:

• Your insurance agent
• Your health insurer
• Your bank’s main AND local branch
• Your brokerage house
• All of your credit card issuers

Utilize these websites and numbers to make sure you welcome the month of May prepared and in top financial condition!

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company.  Data Facts provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

FHA Changes Their Stance On Collection Accounts…..for now

FHA had decided to implement a new rule that would not provide home loans to applicants with collections of over $1000, unless those balances were paid off before closing.  

The rule (Mortgagee Letter 2012-3) was announced by the agency in March and set to take effect on April 1.  Affecting all potential home buyers who were showing an unpaid collection on their credit reports, this new stance was expected by housing analysts to have a negative impact on the housing market.  

FHA was going to require buyers to pay off collections of over $1000 before a mortgage loan would be extended.  The FHA attributed the change in policy to their ongoing effort of building a stronger portfolio.

The worry from mortgage experts was that this would be especially detrimental to young, first-time homebuyers.  These borrowers most likely would not go through the tedious process of paying off old collection accounts, due to the expense and the frustrating difficulty in dealing with creditors.

According to an article on Builderonline.com   “JPMorgan Chase analysts estimated the rule would cut demand for FHA loans by 10% to 20% in the next few months.”

The ruling has now been postponed to not take effect until July 1. This will give FHA time to seek additional input on this section and work to clarify guidance, as appropriate.

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company that provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

Credit Scores: Small Mistakes that Spell Big Trouble

Most people are aware of the big actions that can cause your credit score to take a tumble: filing bankruptcy, having an account sent to collections,or being foreclosed upon. However, these are not the only actions that can decrease your credit score. Here are some other mistakes a consumer can make with their credit. While not ‘major offenders’, these 5 missteps can still prohibit you from joining the credit elite.

Maxing out your credit card.

 The balance to limit ratio is almost as important as paying your bills on time, accounting for 30% of your credit score.  A good rule of thumb is to never charge over 30% of your credit limit. This means if you have a total of $10,000 as the limit on your credit cards, you should never have a balance greater than $3,000.

Consumers who think they are managing their finances wisely by only having one credit card, but are using over 30% of the limit are actually HURTING their credit score.

 Missing a payment

 Just one 30 day late payment can drop your credit score significantly. Payment history is the single most important factor in the calculation of your credit score, at 35%.

A consumer who has no late payments on their credit history is gaining lots of points for their positive usage! One late pay can change all that. It is possible for a good credit score to drop 80 points with just one 30 day late.

Whether you sign up for automatic payments through your bank, get an app that reminds you, or write the date your bills are due on your calendar, pay those bills on time!

 Not checking your credit report.

It is estimated that over a third of credit reports contain some sort of error. These bits of erroneous information can be accounts showing late that were actually not late, collections that should have never gone into collections, or accounts that are not even yours! 

By not checking your credit report, these errors linger on your credit history and can cause your score to take a dive. Be sure you are checking your credit report at least once a year.  Review all accounts, balances, and payment history.  Make certain to follow up on any information that looks erroneous, and get it removed from your report by filing a dispute.

 Co-signing a loan.

 Sure, you want to be a good friend, neighbor, cousin, brother, etc. and help obtain a line of credit your loved one cannot qualify for on their own.   However, becoming a co-signer on a loan for someone else is really asking for trouble.  If the borrower does not pay on time or at all, you are responsible for the loan.

The loan will also show up on your credit report and be factored into your credit score. If the borrower is paying late, all those late pays will show up on your credit report, affecting your credit score in a very negative fashion. And once that happens, there is nothing you can do about it.

The scariest part of all is that this can happen without your knowledge. Co-signers rarely receive a copy of the bill, so they would not be made aware of the issue until the account was in a default status.

The best advice on this one is: Just say NO!

 Closing an old credit card

 15% of a person’s credit score is their length of credit history.  Credit cards are factored in by the age of the oldest account, and the average age of all the accounts.

Look at this example. Say you have 4 credit cards. The oldest is one you opened in college, 22 years ago. The others you have had 15 years, 9 years, and one you just opened 2 years ago.  Currently, the oldest account is 22 years old, and the average age of the accounts is 12 years.  If you close the oldest account, that changes the oldest account to 15 years, and the average age of the accounts decreases to 8 years. This change in credit history can cause a decrease in your credit score.

The best idea would be to keep the old credit card, and use it a few times a year to make sure it is positively factored into your credit score.

 It’s obvious to guard against bankruptcy, foreclosures, and collections.  Also make it a top priority to put measures in place to make sure you don’t make any of these small credit mistakes either.  Your credit score will thank you for it!

~~Susan McCullah is the Product Development Director for Data Facts, a 23 year old Memphis-based company that provides mortgage product and banking solutions to lenders nationwide. Check our our website for a complete explanation of our services.

Pay off your credit card every month? Your credit report may still show a balance

To all you consumers who pay your credit card balances in full every month; good for you! 

Not carrying a balance on a credit card is one of the best financial maneuvers you can make for yourself. This ensures that you won’t rack up expensive finance charges, nor will you find yourself deep in credit card debt.

However, if you are using your credit cards, your credit report may still show a balance, even if you pay it in full.
What??
The answer is simple. Creditors only report and bureaus (Experian, Transunion, and Equifax) only update your accounts once a month, but not necessarily on the first of the month.

For example:
You charge $2000 on your Visa. The bureaus may have updated their records on the 25th. You pay it in full on the 1st of the month.  If you pulled your credit report before the bureaus updated again, the $2000 balance would show up on your credit report and impact your credit score.
Now remember, balances make up 30% of your credit score, so this little process could cost you lots of points if you don’t manage it beforehand.

Here are 3 points to remember:
–know your limit. Your credit card limit is an important piece of knowledge when managing your credit score. Be sure you are aware of the limit of each and every credit card in your possession.
-keep the ratio low. Never at any time charge more than 30% of your credit card limit. This is known as ‘credit utilization’. If you have a Mastercard with a $10,000 limit, never at any time should you have a balance greater than $3,000. Charging more than this could decrease your credit score. If you need to charge more than 30% throughout the month, it is better to increase your credit limit or charge it on more than one credit card, thereby keeping the credit utilization low.
-remember there is no way to know when creditors report to the bureaus. Creditors send their consumer information to the bureaus at different times throughout the month, so there is no set time that your credit report will ‘update’.
Paying your credit card balance in full every month is fabulous for your financial (and mental) health. Taking these extra steps and managing your balances throughout the month will help you greatly in maintaining the very best credit score available to you.

~~Susan McCullah is the Product Development Director for Data Facts, a 22 year old Memphis-based company that provides mortgage product solutions to lenders nationwide.