Data Facts Blog


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.

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.

Data Facts Answers Question About Authorized User Accounts

Question:  “In the past, our mortgage company has encouraged borrowers who have either little credit or are rebuilding their credit to become an authorized user on the account of a spouse, parent, or sibling. Recently, however, we have heard that authorized user accounts are no longer factored into a person’s credit score, and will not help increase a credit score. What is true?  Help!”

Data Facts answers: The designers of the credit scoring formula model (FICO) meant for authorized user accounts to be utilized for a person with good credit and a long credit history to be able to assist their children, spouses, or siblings with their credit history. When an account holder adds another person to their account as an authorized user, that person gets all the benefit of the good payment history. In lots of cases, this dramatically increases a person’s credit score.

Sneaky people began to exploit this practice. Websites popped up selling “piggybacking”. A person with less than stellar credit history could be added to a complete stranger’s credit, and artificially boost his score.  These websites charged thousands of dollars, and paid people with good credit to add dozens of stranger’s names to their credit accounts!

In an attempt to eliminate this practice, the credit score model builders for Fair Isaac originally decided that their new scoring model- FICO 08- would NOT consider authorized user accounts in the formulation of the credit score.

 After further research, however, they reversed this decision. Eliminating authorized user accounts would wipe out millions of consumers’ credit scores who utilize the authorized user status legitimately (they are authorized users on their parents’, spouse’s, children’s, or siblings’ accounts). The model builders decided to allow the authorized user status to still be figured into the credit scores. (Keep in mind the model builders have added additional- although undisclosed- measures that will close the piggybacking loophole).

Allowing authorized users accounts to be figured into the credit score is great news to millions of consumers who maintain that status legitimately. However, if you are an authorized user, try to follow these tidbits of advice:

 – Make sure the main account holder has a good credit history. An authorized user does not need to be on accounts that have just been opened, or accounts with late payments or high balances. The goal is to use the account to boost a credit score. A credit line that is new, paid late, or almost run to the limit will most likely result in the score dropping.

–  Open at least some accounts in your name. While an authorized user designation does figure into the credit score, some lenders remove those accounts from consideration during lending decisions. Consumers should realize it’s risky to rely on authorized user accounts for their entire credit history. It is recommended that consumers be a main or joint borrower on at least a couple of credit lines.

–  Be sure you trust the main account holder. If the main account holder begins paying late or runs up the balance, your credit will be affected (remember, however, an authorized user will not be responsible for the debt).  Make certain the account holder is someone you trust to make good financial decisions before becoming an authorized user on their account.

When employed correctly, the authorized user designation continues to be a helpful tool which consumers can utilize as a boost to their credit history. It is not a long-term solution, and should be used as only one small portion of the credit building plan.

~~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.

Credit Score Success from Scratch; a Simple Recipe

A high credit score is like a homemade meal; it takes time, patience, and cannot be whipped up instantly.  Let’s look at the recipe to build a great credit score from scratch:

First, you need to have the ingredient of credit. People who don’t have any credit are not showing the credit scoring model their financial management skills.  A credit card, home loan, or car note is a main ingredient in the credit score recipe.  Remember: you are not required to carry a credit card balance. Using a credit card will help build your credit even if you pay it in full every month.

Second, make sure you pay a lot of attention. Pay those credit obligations on time, because timely payment is the single most important aspect of building a good credit score.  You can gain lots of points by having a good history of on time payment, and, conversely, you can spoil your credit score with just a few missed or late payment patterns.

Third, keep those credit card balances low. Credit card balances are like salt, less is more.  The credit scoring model looks at your credit card balance in relation to your credit limit (this is called a credit utilization ratio). The lower the ratio, the more positively it affects your credit score. Make sure to never charge over 30% of your total credit limit, because you don’t want to get penalized.

Fourth, keep those old credit cards open and use them every now and then. You will get points for a long, lengthy credit history.

Fifth, don’t add too many ingredients all at once. If you don’t have any credit and are just starting out, don’t open too many credit cards too fast. One line of credit every year or so will work out great.

Sixth, remember to have more than one ingredient, if possible. The scoring model likes to see that a person can manage a mix of credit. Having installment loans (mortgage or car) and revolving loans (credit cards) will give a boost to your score.

Seventh, keep an eye on it. Check your credit report at least once a year and examine it carefully.  Make sure there aren’t any errors (such as creditors that you don’t recognize, late payments or collections reporting incorrectly, etc). This happens all the time, and the sooner you catch it, the better off you will be. Dispute any incorrect information to get it removed.

Attaining a great credit score takes a little time, self discipline, and attention. However, putting in the effort will assure that you can get the best deals on mortgage, auto, and credit card rates. Following the recipe we just laid out is a great start to help you cook up a great credit score!

~~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.

How Your Credit Score May Be Stealing Your Money

Posted in Credit Score,Mortgage,Uncategorized by datafactssolutions on August 10, 2011
Tags: , ,

Burglars and purse snatchers have nothing on your credit score! A low score can be stealing money right out of your pocket every month. This can add up over time to hundreds of thousands of dollars.
Here’s how:
Mortgage loans: Let’s say you have a 650 credit score and bought a $200,000 house with a 30 year fixed rate loan. You are going to have to finance it at a rate 1-2% higher than the person rocking a 750 credit score. Over the course of 30 years (360 payments) this difference can add up to around $49,000!
Auto Loans: the average American trades cars every 5 years. Based on this estimate, a person buying a $25,000 car with a 650 credit score will pay approximately $5400 more for EACH CAR than the person with a 750 score.
Credit cards: a person with a 650 score has probably had some late payments and may have maxed out their credit cards. They will not get the great terms and plentiful options that a person with a higher score will enjoy. The average household carries $7300 in credit card debt (Yikes!). If we assume this amount, a person with the 650 credit score will pay $552 more in interest per year than a person with the 750 credit score.
Gulp.
So, if you have a 650 credit score, here’s how much your credit score will steal from you over a 40 year period:
Mortgage: $49,000
Auto: $43,000
Credit Cards: $22,000
Total amount the 650 credit score has stolen: $114,000
The figure would be much larger if this money had been invested in a mutual fund. At a 6% rate, this amount of money would have grown to about half a million dollars.
Remember; protect yourself! Lock your doors, lock your windows, don’t talk to strangers, and keep that credit score high!
Coming soon! Tips on how to make sure you have a top notch credit score.
~~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.