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Can’t Get Approved for Credit? Here’s Why

dcCred — Thu, 04 Aug 2022 19:48:18 +0000

If you are approved to get a credit card, you will know immediately, but if not, an adverse letter is sent to explain why the credit card was denied. The letter includes instructions to get a free copy of the credit report if it was used in decision-making.

While waiting for the letter, you should know that nearly a quarter of Americans don’t qualify for credit, and here is why:

1. Unreasonable Balances

Many existing unpaid debts can make it hard to make new payments. If your balances are high, credit issuers may find it hard to approve your applications.

Also, lenders prefer a person who does not exceed their available credit. In addition, when if you have too many inquiries on the credit report for credit cards and loans within a short period, your credit application is likely to be turned down.

2. Having Low income

The income required to acquire a credit card is different for various credit issuers. Lenders always verify your income because people inflate their income, on paper, to look more financially stable.

Credit might be denied if the income you earn is not enough to cover your expenses or if you do not have any income of your own. However, credit card companies do not publish the level of income required; it’s up to you to investigate a credit card that fits your earnings.

Credit can also be disapproved if you have been employed in different places over a short period. Most companies prefer people with a stable work history because if one jumps from one job to another, it demonstrates financial instability.

3. Having a Limited Credit History

A credit application might be denied if you have never owned a credit card and have no history of loan use. First off, if you are new to taking credit, you need an active credit report for the past six months for your credit scores to be generated.

That said, having too many lines of credit can also make one be denied new credit. However, the is no limitation on the number of credit facilities one should have with new credit being at the discretion of the lender.

4. Uncompleted Application

When essential information is missing from the application form, or if there is a major difference between your application and credit report, your application may be disapproved. Some vital information to counter-check includes the date of birth, home address, and residential and work addresses.

At the same time, credit companies also consider your age. If you are below eighteen, they might deny you a credit card. This is because people below legal age do not have stable sources of income; and for those who do, the transaction is backed by adults or family estates.

5. A Charge–off on Credit Report

A charge-off is a balance on a credit card that has gone unpaid for at least six months. This makes your credit report unappealing. Failure to repay a credit card or a personal loan, especially if you had taken it recently, may make a lender deny you credit.

Lenders, including banks, may not trust you enough to approve a credit card unless you settle previous debts. Your last delinquency also affects your credit approval. Why? Recent payment history shows how you’d pay for your new credit facility.

6. Bankruptcy

Bankruptcy also makes credit issuers question your ability to pay debts. It shows you are a credit risk and mostly FICO uses bankruptcy as a great determinant of your creditworthiness. In addition, freezing your credit report to protect your finances can also lead to credit disapproval.

Conclusion

Different lenders have varying criteria for credit approval. Nevertheless, the factors that go into proving that you are creditworthy are the same across the board. With the right credit scores, a rich credit history, and an income to support credit, your application is bound to go through.

Note, if you check all the boxes and still get disapproved, the problem could be your timing. The reason is that if a lender is swamped with new applications, they may limit new credit; so, try later or approach a different lender.

If you’re having trouble getting approved for credit, contact Credit Absolute for a free credit audit and consultation.

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What bills help build credit?

dcCred — Fri, 22 Jul 2022 19:22:20 +0000

Disclosure regarding our editorial content standards.

When you’re trying to improve your credit score or establish a credit history, it can be challenging to know what factors are most likely to help. After all, it can take six months of positive financial practices to build a good credit baseline.

While regular monthly bills don’t make up a major portion of your credit score, several types of bills can have positive—or negative—effects. Keep reading to learn which bills can potentially help you build your credit.

What bills count toward your credit?

Keeping up with monthly payments on your credit card, auto loan, student loan, medical bills, rent and monthly utilities could help build your credit.

Credit card payments

Credit cards are one of the most influential monthly bills that contribute to building credit. These accounts are reported to the major credit bureaus—namely, Experian®, Equifax® and TransUnion®—making them notable contributors to your overall credit report.

To leverage credit card usage and build credit, try to pay off all your credit cards in full each month. Making minimum payments can help your credit score as well, but only if your overall credit utilization remains low.

Also, remember that avoiding credit card usage doesn’t necessarily help your credit. So long as you’re making appropriate payments, utilizing cards frequently can help to build credit through a record of on-time payments.

Auto loan payments

Car loan payments are also reported to credit bureaus, which means it only takes one late or missed payment to see a negative impact on your credit. If you’re going to finance a vehicle, be sure you can comfortably make the monthly payment on time every month.

Student loan payments

Like credit cards and auto loans, student loans appear on your credit report. If you’re struggling to keep up with payments, that can be a negative factor.

However, student loans can also be key in helping younger people build a positive credit record. Since the length of credit history factors into credit scores, many borrowers may benefit from a loan account dating back to their early college days—especially if they don’t have a great deal of other credit history to show.

That said, late and missed payments can hurt your credit score, so if you’re having trouble making monthly student loan payments, don’t hesitate to research alternative payment options.

These may include refinancing, deferring loans while still pursuing education, exploring loan forgiveness programs or switching to an income-based repayment schedule, depending on the types of loans you’re holding.

Medical payments

Figuring out where medical bills fit into your credit picture can be complicated. On one hand, medical bills aren’t normally reported to credit bureaus as long as they’re in good standing. So, if you’re making all your medical payments on time, you’re in good shape.

But medical bills tend to come unexpectedly and, if you fall behind on payments, you could be hit with another surprise when an unpaid medical bill in collections appears on your credit report, bringing down your score.

The good news is that, as of July 2022, the top three U.S. credit reporting agencies have made changes to the way medical bills will appear on reports, not including them until a bill has been in collections for a full year and not at all if the outstanding bill is less than $500. If a medical bill in collections does end up on your credit report, keep in mind that it won’t be dropped from your report for seven years unless you pay it off or it was reported in error.

(Sometimes) rent, phone and utility payments

Rent can be another tricky factor in your overall credit picture as landlords generally don’t report payment information unless there’s a problem (i.e., missing or late payments). That said, the three major credit bureaus will all include this data on your report if they see it (note that there are ways to petition landlords to report your on-time, positive payments).

The same largely goes for other monthly bills, such as phone, internet, cable and basic utilities. As long as you’re keeping up with your payments, there’s nothing to worry about, but if you’re focusing on building your credit, it’s essential not to let these bills fall behind and end up in collections.

What bills don’t count toward your credit?

When you’re considering what bills help build credit, keep in mind that some types of bills will never appear on your credit report and therefore have no impact on your score. Specifically, tax liens and civil court liens are no longer reported to credit bureaus, while other fees like library fines and parking tickets are never a credit concern.

Why some bills are counted and others aren’t

As you’ve probably noticed, the factor determining whether a bill counts toward your credit score is whether it’s reported to credit bureaus. Surprisingly, lenders and creditors aren’t legally required to report account and payment information to credit reporting agencies.

Industry standards, however, dictate that certain types of debt—such as mortgages, student loans and credit cards—will be reported as a matter of practice. Providing that information helps these companies make better decisions about how they’ll loan money or extend credit to individuals in the future.

There’s a way to use this system to your advantage while building credit. While many bills may not be reported to credit bureaus when paid on time, those bills may often be paid by credit card, which will be reported. The advantage here is that having regular monthly payments processed through a credit card will help you build a history of credit usage, especially if you’re starting from scratch.

Be aware, however, that if you’re struggling to keep up with bills, paying with a credit card only to fall behind on paying off that credit card balance will have a fast negative effect on your credit score.

Some providers only report late payments and collections

If there’s one thing you can do to make sure your credit continues to improve over time, it’s paying all your bills on time. Many creditors only report to credit bureaus when payments or late or missed or when an account is sent to collections, all of which negatively impact your score—and negative items can remain on your credit report for years, keeping your score down long after you’ve established positive credit habits.

Other simple ways to build credit

While you’re working hard to pay bills on time, there are some other steps you can take to begin building or improving your credit.

Maximize your length of credit history by leaving older accounts open, and avoid opening new ones more than necessary. Applying for new credit can also result in credit inquiries that may weigh against your score.
Instead of opening a new credit card, ask for a credit limit increase. This will allow you to maximize credit utilization on a single, older account rather than regularly hitting your max across multiple younger accounts.
Set up automatic bill pay. If forgetting to pay bills on time is causing your accounts to fall into poor standing, setting up automatic payments can make sure those bills are taken care of each month.
If you already have outstanding late bills, get caught up as soon as possible. If you make a payment before the account is sent to collections, you may still avoid having it show up on your credit report at all.
Check your credit reports and dispute any errors. According to the Consumer Financial Protection Bureau, you should check your credit reports at least annually and make sure there are no errors that might stop you from getting a loan or credit. Make use of free credit report providers and write to credit reporting agencies to dispute any errors you encounter so they may be removed.

If you’ve taken all these steps and you’re still not happy with your credit standing, or if you’re simply having trouble understanding all that goes into your overall credit picture, a CreditRepair.com can help you get back on track and build the credit you desire for a more secure future.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Getting approved for an FHA loan with bad credit

dcCred — Thu, 21 Jul 2022 19:21:22 +0000

Disclosure regarding our editorial content standards.

Buying a home is exciting, but it can also be scary or even a little intimidating. Although Experian® reports the average credit score in the United States is 714, the reality is a large percentage of Americans have credit scores that fall below that number, making it difficult for them to qualify for conventional home loans. Luckily, other options are available for individuals with bad credit who want to achieve the American dream of homeownership.

An FHA loan is a popular financing option for first-time buyers, buyers who may not have a large down payment and buyers with less-than-perfect credit. Getting approved for an FHA loan with bad credit may be more realistic than you might think.

What is an FHA loan?

An FHA loan is a mortgage loan insured by the Federal Housing Administration. They typically have fewer restrictions than conventional loans, making it easier for borrowers with low credit scores to get approved.

FHA mortgage insurance protects lenders against losses, so they can afford to offer home loans to borrowers with lower credit scores and individuals with small down payments.

Can I get an FHA loan with bad credit?

If you have bad credit, you may think homeownership is out of the question, but that may not be the case. Over the years, the Federal Housing Administration has loosened the guidelines of its loan program to allow more borrowers to meet the requirements necessary to qualify for a home loan. Even those who’ve experienced bankruptcy or foreclosure may qualify for an FHA loan.

A conventional home loan typically requires a credit score of 620 or higher for approval. So many borrowers with bad credit are drawn to FHA loans because the approval rating is higher for those with lower credit scores. There are no guarantees, but FHA loans can make the dream of homeownership a reality for those with bad credit.

What are the benefits of an FHA loan?

FHA loans allow borrowers to pay smaller down payments, allowing them to reserve funds for other expenses related to homeownership.

Other benefits of FHA loans include:

Flexible co-signer rules
Easier qualification requirements
Option to finance some closing costs
Higher debt-to-income ratio (DTI)
Looser rules on gift funds (i.e., who can give you money for a down payment)
More affordable interest rates

While these loans are very popular, they aren’t for everybody, says Justin Pritchard of The Balance. He cites not being ready to take on a mortgage, paying mortgage insurance and higher up-front costs as a few drawbacks of using an FHA loan.

Requirements for an FHA loan with bad credit

Generally speaking, bad credit is a score of anything less than 500, but that answer varies depending on the lender. Many lenders won’t extend loans to borrowers with scores lower than 500. Even with a score of 500, the loan approval may come with additional requirements.

Down payment requirements

How much of a down payment you’ll need to purchase a home with an FHA loan depends on your credit score. Borrowers with a FICO® score of at least 580 may qualify for a 3.5 percent down payment. Borrowers with a FICO score between 500 and 579 will be required to provide a down payment of 10 percent.

Additional requirements

Borrowers will also need proof of income and steady employment.

How to apply for an FHA loan with bad credit

If you want to pursue an FHA loan, you should first find an FHA-approved lender. Most banks and mortgage companies offer FHA loans. If you don’t already have a lending institution in mind, you can do some online research to find some FHA-approved lenders.

After you select the lender you want to use, you’ll submit a loan application. You can apply online, over the phone or in person with a loan officer. Whichever way you choose, there are some things you’ll want to have handy to make the process smoother.

Here are just a few important pieces of information you’ll need:

Complete names of borrowers plus any co-borrowers
Current address
Social Security number
Employer information along with salary information (complete with pay stubs)
Credit report with information on all open loans and real estate
Tax returns (for at least two years)
Bank account statements
Other information as requested by your lender

Once you submit your application, the lender will let you know the next steps regarding approval. If you’re approved for a loan, the lender will provide you with the loan estimate, which will disclose information about the loan interest rate, loan terms, monthly mortgage payment and closing costs.

Even with bad credit, it’s a good idea to shop around to make sure you get the best rate you can get.

Refinancing an FHA loan with bad credit

Over time, you may notice that mortgage rates decrease, and you may want to take advantage of the opportunity to lower your monthly payment, change your loan terms or get some extra cash to pay for some things you need. One option is to refinance your FHA loan.

With very similar guidelines to FHA loans, FHA refinancing options exist, and you may qualify even if you have a low credit score. Check with your preferred lender to see if you meet the requirements for refinancing.

First-time homebuyers and FHA loans

If you’re a first-time homebuyer, it’s not uncommon to be overwhelmed with the process. FHA loans are a great option for first-time buyers, especially those with bad credit. The below-average mortgage rates and flexible lending rules make it easier for first-time buyers to get approved for loans and get into their first home.

What to know about FHA loans and bankruptcy

Borrowers who have a bankruptcy on their credit report may think homeownership isn’t an option, but that may not be true. Though bankruptcy can stay on your credit report for seven to 10 years, you may still qualify for an FHA loan.

Chapter 7

According to FHA loan guidelines, a borrower may be able to obtain an FHA loan just 12 months after Chapter 7 bankruptcy has been discharged. The borrower must prove that the bankruptcy was caused by circumstances beyond their control. Otherwise, borrowers must wait two years after discharge to qualify for an FHA loan.

Chapter 13

Qualifying for an FHA loan after Chapter 13 bankruptcy might be easier than after Chapter 7 bankruptcy. The borrower will need to be at least one year into the repayment plan to apply for an FHA loan and be current. Additionally, your bankruptcy attorney must give written permission for you to take out a new loan.

Repairing your credit

If you have bad credit, you may think you’re stuck with it—at least for now. But you have options. You can work to improve your credit yourself or you could reach out to a credit repair company like CreditRepair.com. The credit advisors at CreditRepair.com can work with you to remove inaccurate items from your credit report, potentially improving your credit score.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Hard vs Soft Credit Report Inquiries: Here’s the Difference

dcCred — Tue, 12 Jul 2022 19:09:14 +0000

It is common practice for a person’s credit report to be pulled by creditors or lenders when someone wants to secure a loan for a home or automobile or open a credit card account. Thanks to the Fair Credit Reporting Act, there are laws designed to protect consumers when it comes to their credit information being collected. As a result, when someone’s credit file is viewed, it is considered either a hard or soft credit inquiry.

Due to the adherence of certain procedures by all parties who request to view a consumer’s credit report, consumers know that their credit will need to be pulled from time to time, but what’s the difference between hard and soft credit inquiries?

Hard Credit Inquiries

A hard credit inquiry, also known as a hard pull, is a request made by a creditor or lender to review someone’s credit profile when they are seeking credit.

For example, when applying for a personal loan or credit card, the applicant grants the lender permission to view their credit report. Credit reports include information about the consumer’s ability to manage debt and credit by providing details about things like the number of credit accounts they own, the type of credit accounts they own, and the amount of debt a person may have. Lenders like to review each applicant’s credit report and the information reflected on the report to determine if an application should be approved or denied.

Since the applicant is seeking to open a new credit account, it will appear as a hard inquiry on their credit report even if the application is denied. Once a hard inquiry appears on a credit report, it will remain for two years. Each of these inquiries that are listed will provide details as to when someone applied for credit and how often. This information is factored into a person’s credit score, so it can be harmful to have too many hard inquiries listed. In fact, hard inquiries can result in a decrease in credit score.

Soft Credit Inquiries

A soft credit inquiry, also known as a soft pull, is a request made by an individual, company, or financial institution to review someone’s credit profile when they are not seeking credit.

For example, when a consumer decides to view their own credit report to confirm that the information listed is accurate and up to date, or when an employer is performing a background check on a potential employee and needs to verify their identity. The consumer is not submitting an application for credit, so this is considered a soft inquiry. Unlike a hard credit inquiry, this type of inquiry does not show up on credit reports. Although, the consumer will be able to view each of these instances, whether their credit report was viewed by the consumer, potential employer, or another individual, lender, or company that needed additional information about the consumer.

In some cases, someone who is interested in securing a personal loan may decide to check rates or pre-qualify for a loan before submitting an application. Although the lender is using the applicant’s credit information to provide potential rates for the personal loan, it is considered a soft inquiry because there was not an actual application for credit submitted.

It may not always be disclosed whether a credit inquiry will be soft or hard. Depending on the reason for the inquiry, consumers may be able to determine the type of inquiry, but it is not a bad idea to ask. With hard inquiries impacting credit scores in a negative way, and soft inquiries having no impact, consumers want to be cautious of how many hard inquiries they have listed.

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What is the credit score needed to buy a home in Texas?

dcCred — Fri, 01 Jul 2022 18:50:41 +0000

Disclosure regarding our editorial content standards.

If you’re looking to buy a house in Texas, expect a healthy market with lots of demand and competitive pricing. Having a score above 700 significantly increases your chances of getting approved and securing a lower interest rate.

Every week, 3,800 more people move into homes in Texas than move out. In 2021, the state saw 416,853 home sales, which was a 5.9% increase from the previous year, and the median home price in Texas as of January 2022 was $376,363, having risen 16% from the previous January. If you’re looking to buy a house in Texas, expect a healthy market with lots of demand and competitive pricing.

Generally speaking, you need a FICO® credit score of at least 620 to be approved for a conventional loan in the United States. However, having a score above 700 significantly increases your chances of getting approved and securing a lower interest rate.

Keep reading to find out more about the Texas market so you can prepare yourself for purchasing a home in the Lone Star state.

What is a credit score?

A credit score is measurement used by lenders to determine your creditworthiness (or the likelihood of you paying off your debts). The most commonly used score is the FICO credit score, which generally ranges between 300 and 850; the higher your credit score, the less risky you’re deemed as a borrower.

Credit scores are based on the information from your credit report, including data about your current loans and balances, your payment history, your outstanding debts, and incidents of bankruptcies. More specifically, your credit score is made up of five factors, each of which is weighted differently:

Payment history: 35 percent
Amounts owed: 30 percent
Credit history length: 15 percent
Credit mix: 10 percent
New credit: 10 percent

Credit scores are commonly broken down as follows:

800-850: Exceptional
740-799: Very Good
670-739: Good
580-669: Fair
300-579: Poor

How does my credit score affect my mortgage interest rates?

For a conventional mortgage, your credit score is one of the main factors considered when reviewing your mortgage application. For this reason, many people try to improve their credit score when they know they’ll be purchasing property in the next few years. Your credit score can also impact how large a mortgage you qualify for, your interest rate, and the loan terms

As your mortgage is such a large loan, securing the best interest rate possible is crucial. A difference of 1 percent in your mortgage loan can cost you significantly. For example, let’s look at a person purchasing a $300,000 home with a 30-year loan term. The difference between securing an interest rate of 5.50 percent and 5.25 percent means paying nearly $17,000 more in interest over the life of the loan.

What credit score do I need to buy a house in Texas?

You’ll need a score of at least 620 to be approved for a conventional loan in Texas, but there are many options for you if your score sits below 620 (see below). Remember, mortgage lenders look at your credit score in conjunction with other financial factors when determining if you qualify for a loan.

Unfortunately, even a score of 620 doesn’t guarantee loan approval. Ideally, prospective buyers in Texas should aim to have a credit score of 760 or greater to increase the chances of approval and securing the best interest rate possible.

What is the average credit score needed to buy a house?

Generally, the higher the credit score, the better your chances of getting accepted for loan approval. The good news is that if you don’t qualify for a conventional loan (minimum credit score of 620 required) there are many other options for home loans for your to look into.

The different types of mortgage loans and their minimum credit score requirements are:

Conventional loan: Credit score of 620 or higher and a 3% to 5% minimum down payment.
USDA loan: If you’re looking to purchase rural property in Texas, you could potentially qualify for a loan from the USDA’s Single-Family Housing Direct Home Loan Program. USDA loans don’t technically have minimum requirements, but typically borrowers need a credit score of at least 640 to qualify.
VA loan: The Veteran Benefits Administration offers qualifying veterans, service members, and spouses VA loans, a type of government-backed mortgage. Similar to the USDA loan, the VA loan doesn’t have a minimum requirement, but people typically need a score of at least 640 to be approved.
TDHCA loans: Texas has two state-specific programs to help individuals purchase a property: My First Texas Home and My Choice Texas Home. My First Texas Home is available to all first-time homebuyers, veterans, and homebuyers who haven’t purchased a property in the last 3 years that meet certain income guidelines. My Choice Texas Home is a program for those who don’t qualify for the My First Texas Home program. Both of these programs have a minimum credit score requirement of 620.
Federal Housing Administration (FHA) loan: FHA loans require a credit score of at least 580, with a down payment between 3.5%-10%. However, lenders with a score between 500 and 579 may still qualify if they have a down payment of at least 10%.

Can I get a mortgage with bad credit?

Yes, it’s possible to get a mortgage with bad credit. As listed above, many programs work with people with lower credit scores. Often, being strong in other areas—such as having a sizable down payment—can make up for a low credit score.

Remember that getting a mortgage with poor credit likely means you’ll get a high interest rate and less favorable lending terms. This means your mortgage will likely cost you more, so it can be very beneficial to focus on improving your score before you apply.

What other factors do mortgage lenders look at?

Your credit score is an integral part of your mortgage application, but it’s not the only thing mortgage lenders look at. They may also consider:

The size of your down payment
Income and savings
Employment history
Debt-to-income (DTI) ratio
Bank statements
1-2 years of tax returns
The assessed value of your home

How can I raise my credit score?

If you’re not already in the home buying process, you likely have the time to work on improving your credit score. Some actions you can take to improve your credit score are:

Paying down existing debts
Making sure you pay all your bills on time and in full, if possible
Keeping your credit utilization under 30 percent
Keeping your oldest accounts open (even if you don’t use them)
Avoiding applying for new credit, so you don’t have hard inquiries into your account

Also, you’ll want to review your credit report and ensure you don’t have any inaccurate or false information on your file. Errors on credit reports are common and can drag your score down unnecessarily by several points. When you find a mistake, you have the legal right to file a dispute to have it removed from your credit report.

If you need help with the credit repair process, consider hiring the advocates at CreditRepair.com. We can review your credit report with you, help you find errors and file disputes, and give you credit education. Online consultations are free. Start now!

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Part 1 – Credit Scores Broken Down – Payment History – Credit Absolute, How Credit Scores Work

dcCred — Tue, 14 Jun 2022 18:17:28 +0000

Video Transcript Below:

What’s up everyone is Derek Vogel with Credit Absolute. So this is going to be the first part of the credit knowledge and information I’m going to share with you on how the credit scores are broken down.

So the number one component of our credit score that has the biggest impact is payment history. Okay so let me show you this chart here. Alright, so what we’re looking at here is thirty-five percent, thirty percent, fifteen, ten, ten. Okay and as I told you our total score is based on five hundred fifty points. Alright, so when we break down thirty-five percent into five fifty you can then see what the total value of points is that impact our score. So payment history is 192.5. Credit cards are 165. Age of credit is 82.5. You got the proper mix of credit which is 55 points and then new credit line inquiries is 55 points which add up to the 550.

Let’s first talk about payment history I’m gonna go ahead and put this board down but a payment history alone is one of the key factors in our credibility on how we are credible and/or irresponsible enough to pay our bills on time. Now, one 30-day late payment can actually impact your score over 100 points. Okay, because it’s worth 192.5 and so whatever you do and whatever situation that you get in no matter what if you can at all possible always make the minimum payment. Okay, it’s critical because if you get a 30-day late it’s going to impact the scores dramatically and, more importantly, it takes nine months to recover from one thirty day late payment and these are on credit card accounts.

Now if it’s a mortgage late there is a little bit of longer recovery time. They say one 30-day late can take up to two years to completely recover from. Okay and then if you get multiple lates you’re talking, you know, three to five Years. Okay and then if it goes 90 days pretty much what happens is you go into what’s called T key derogatory and it takes seven years to recover from that. So it’s almost like a charge off for collection which is brutal.

Now you could have heard in the past you know just make your payments on time and your scores will be fine. Well your scores could be fine but I just want to share with you making your payments on time is not everything that you can do to have perfect credit and what I mean by that is I see quite a few of my clients that come to me that have perfect payment history, have never missed a payment and they have a low credit score like in the low 600s. Okay, the reason why is because the other 65% of the score that we talked about makes up the total 550 and it’s extremely important that that is managed properly.

All right so you can have perfect payment history again but if you have high balances, if you don’t have the proper mix of credit, if you have a young credit history, all of those things are going to factor into what I think is really cool and important which I’m going to cover a little bit more on the proper mix of credit but if you have a few accounts and not multiple then your scores will be damaged more excessively or harder because you have less credit reporting. So it’s going to have a heavier impact.

So let’s say that you have ten accounts and all those accounts have two years of perfect payment history and let’s say one of those accounts you end up getting a 30-day late payment well they’re gonna take everything and look at that and say “look well we had nine accounts with positive payment history and this one account it’s still going to have a negative impact very heavily but still it’s gonna be less of an impact because you do have credibility with those other accounts.

Now let’s use that same example let’s say that you only had three accounts and you had two of them that have a perfect payment history and you have that one get two late payments. Well obviously because you have less documentation and data that’s going to allow you to show that you’re more responsible or credible you’re going to get hit much harder if you only have those three accounts. So just know what payment history is, it’s pretty straightforward.

Okay, whatever you do try to make your payments on time and one important thing to understand is that you are not allowed to have a 30-day late report to your credit report unless you’re actually 31 days late.

Okay so on that, on that thirtieth day there are some definite things to be aware of. So like on the report it says fifty thirty-one to like sixty and so they couldn’t report a sixty day late unless you were 61 days late so it’s just you know it’s just important obviously you never want to get to that point anyways but if let’s say that you’re 15 days late you’d get a late fee but if you made the payment and it wasn’t 30 days late they can’t report a 30 day late against you so it is a big violation that we see quite a bit but with the payment history.

Again I hope this helps a little bit, helps you understand that payment history alone like I said it was 35% of the score which calculates to 192.5 but as long as you can manage your payments on a monthly basis it’s going to be one huge component to keeping your scores at the top and then part two actually we’re going to get into the credit cards which is my favorite so I’m looking forward to talking to you about that again.

Again, guys, it’s Derek with Credit Absolute and I hope this helped you today. Thank you.

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What is the credit score needed to buy a home in California?

dcCred — Mon, 13 Jun 2022 18:16:47 +0000

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California is a hot market known for high housing prices, and the minimum credit score you need to be approved for a loan there will depend on several factors. These factors include how much of a down payment you have, the price of the home, and whether you qualify for government-backed loan programs.

Never forget the number one rule with loans: the higher your credit score, the better loan terms you’ll get. For a conventional mortgage in California, you typically need a minimum score of at least 600. If you qualify for certain government-backed loans, however, you may be able to buy a home with a score as low as 500.

Read on to learn about credit scores and how they affect your ability to make a home purchase.

What is a credit score?

A credit score is a number that tells lenders how likely you are to repay your debts. When you apply for credit, lenders will check your credit score to determine if you’re a good risk. Although there are several scoring models available, most lenders use FICO® scores to assess borrowers.

FICO scores are based on your financial habits—things like your payment history and the amounts you currently owe. Payment history is one of the most important, accounting for 35 percent of your FICO score

The amount of money you owe makes up another 30 percent of your FICO score. If you have high credit card or loan balances, a lender may hesitate to lend you additional funds.

FICO scores also depend on the following factors:

Length of credit history
Credit mix
Number of new accounts

How does my credit score affect mortgage interest rates?

Your credit score can make it more or less expensive to borrow money. If you have a high credit score, lenders see you as more creditworthy, prompting them to offer more competitive interest rates and better terms on mortgages and other types of credit. Lending to borrowers with low scores is riskier, so lenders account for that risk by charging more interest or presenting less favorable terms for repayment

What credit score do I need to buy a house in California?

As of February 2022, the median home price in California exceeded $771,000. Home prices are especially high in San Francisco, San Diego, Los Angeles, and Oakland due to the demand for housing in and around the state’s financial and technological centers. The median home price in Orange County has now topped $1 million for the first time ever.

With home prices in California so much higher than the national average, many buyers worry about how high their credit scores need to be to live there. Credit scores are indeed a big factor, but don’t forget it also depends on your financial situation and the purchase price of the home you want to buy.

There isn’t a standard credit score that is needed across all of California, but, generally, mortgage firms and banks prefer to see a score of 600 or higher for loans. Again, that is just a general number. Different home loans have different necessary credit scores, and your relationship with your finances can help you when your score isn’t as high as you would like.

What is the average credit score needed to buy a house?

The average credit score need to buy a house depends on what type of loan you need. Conventional loans, also known as conforming loans, aren’t backed by the government. As a result, they have more stringent borrowing requirements. You typically need a minimum credit score of 620 to qualify for a conventional mortgage.

Government-backed loans—including VA loans and FHA loans—typically have more flexible requirements. If you’re interested in the FHA loan program, you can qualify for maximum financing with a minimum score of 580 and a down payment of 3.5 percent of the home’s purchase price or a credit score between 500 and 579 and 90 percent financing with a 10 percent down payment.

Can I get a mortgage with bad credit?

Anyone can experience financial difficulties, so don’t worry if your credit report has a few blemishes. You may have to wait a little while to build up your credit, but it’s possible to qualify for a mortgage even if you have a low credit score, especially if you qualify for a government-backed loan program.

What other factors do mortgage lenders look at?

Your credit score is just one aspect of your mortgage application. Lenders also look at the following factors to determine if you qualify for a home loan:

Income: Lenders want to see that you have a steady source of income. This helps them determine if you can afford to make monthly mortgage payments.
Bank statements: Your lender will generally ask to see your bank statements to make sure there are no unusual deposits. Reviewing bank statements can also help a lender determine if you have enough money on hand to make a down payment and cover the closing costs on a home loan.
Assets: A mortgage lender may ask you to provide documentation related to investment accounts, insurance policies, and other assets. If you have high-value assets, a lender is likely to see you as less of a risk because you’d be able to sell those assets and use the proceeds to pay your mortgage if you run into any financial difficulties after closing on the loan.
Loan to value: Lenders will look at the amount of your mortgage request vs. the appraised value of the home. The higher your down payment, the lower your loan to value (LTV) ratio will be.
Comparable sales: Lenders will also evaluate comparable sales of similar homes to make sure prices are in line with market conditions.
Credit reports: Your lender will also look at your credit report to make sure you haven’t made any large purchases or opened new lines of credit during the underwriting process. Underwriting is the process of verifying the information you provided on your application.

How can I raise my credit score?

If your credit score isn’t where you want it to be, don’t panic. Because your scores are based mostly on your financial habits, there are a few things you can do to increase them in anticipation of applying for a mortgage.

Payment history is the most important component of your credit score. If you have a low score, make it a priority to make payments on time every month. Over time, late payments have less of an impact on your score, so avoiding additional missed payments can help improve your credit.

Account balances also have a significant impact on your score. If you have a maxed-out credit card or a personal loan with a high balance, focus on paying down the debt as quickly as possible.

If you need additional guidance on increasing your credit score, a credit repair company can help.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

The post What is the credit score needed to buy a home in California? appeared first on CreditRepair.com.

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The Difference between No Credit and Bad Credit

dcCred — Sun, 12 Jun 2022 18:15:58 +0000

Not having a credit score and having a bad credit score are some of the worst financial positions you can find yourself in. Both situations can prevent a landlord from renting you an apartment or may dissuade a creditor from approving you for a loan. Simply put, both situations negatively affect your creditworthiness. To get a clearer picture of each issue, here is the difference between no credit and bad credit.

Having No Credit

Having no credit means there isn’t any information to judge your repayment abilities. Such information is supposed to be reflected in a credit report. Hence no credit translates to not borrowing money in the last 7 years- the time it takes for a credit report item to be removed.

Having Bad Credit

Bad credit means that on a scale of 350-850 points, your score is near the 350 point mark. This happens when you mismanage your credit by being late or missing monthly payments and defaulting.

The Differences

Fees That You Will Be Charged

When you don’t have a credit score you will get charged deposit fees when opening an initial account with creditors. On the other hand, with bad credit, you may not be charged deposit fees. However, when opening one, you will be scrutinized through a bank-specific version of a credit check.

Electricity, phone, cable, and other utility companies also investigate your credit during the application process. A bad credit history attracts a security deposit in order to establish service in your name. Without a credit score, you may not incur such fees.

Chances of Getting a Loan

Each creditor is different, some will allow you to get a loan without the need of any credit history while others will refuse. For young people –just out of college, you might be approved credit on the condition that you have a stable job. On the other hand, with bad credit, you may qualify for a loan but with strict unfavorable terms, like high-interest rates.

It is easier to get a cosigner when you have no credit than when you have bad credit. For any person looking to be your cosigner, they will look at how you repay your debt. This is because if you default or skip payments, their score takes a dip too. Another disadvantage of bad credit is that you may qualify for a lower amount and higher rates than a person with no credit score.

Ease of Building Your Score

With no credit, building your credit score is easier compared to fixing bad credit. Bad credit means that you are working from a bad debt management and repayment situation with different lenders. However, when you have no credit, you are working from a level ground where past financial mistakes don’t influence your score.

Bad credit can be good if there were mistakes when it was being calculated since it can be fixed, which will see your credit take an upward bump.

Career Goals Influence

Having no credit is better than having bad credit when it comes to influencing your career path. Prospective e mployers check credit scores. They are likely to accept a young prospective employee who has no credit than a person with bad credit.

Impact over Time

The impact of bad credit changes over time and terms become favorable with good debt management. Similarly, bad credit could continue lowering your score if left unchecked.

If you miss payments or default, this information remains on your credit report for a whole 7 years from the date that the incident was marked. This will surely affect some of your financial actions during this time.

The impact of no credit doesn’t change over time. Without a score, there is no damaging financial information to worry about. However, your options when it comes to credit will be very limited.

Conclusion

The above information highlights the main differences between a lack of credit and having bad credit. It also goes further to explain how each scenario affects your finances plus how to deal with each situation.

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What is the credit score needed to buy a home in Texas?

dcCred — Sat, 11 Jun 2022 18:14:57 +0000

Every week, 3,800 more people move into homes in Texas than move out. In 2021, the state saw 416,853 home sales, which was a 5.9 percent increase from the previous year, and the median home price in Texas as of January 2022 was $376,363, having risen 16 percent from the previous January. If you’re looking to buy a house in Texas, expect a healthy market with lots of demand and competitive pricing.

Keep reading to find out more about the Texas market so you can prepare yourself for purchasing a home in the Lone Star state.

What is a credit score?

Payment history: 35 percent
Amounts owed: 30 percent
Credit history length: 15 percent
Credit mix: 10 percent
New credit: 10 percent

Credit scores are commonly broken down as follows:

800-850: Exceptional
740-799: Very Good
670-739: Good
580-669: Fair
300-579: Poor

How does my credit score affect my mortgage interest rates?

What credit score do I need to buy a house in Texas?

What is the average credit score needed to buy a house?

The different types of mortgage loans and their minimum credit score requirements are:

Conventional loan: Credit score of 620 or higher and a 3 percent to 5 percent minimum down payment.
USDA loan: If you’re looking to purchase rural property in Texas, you could potentially qualify for a loan from the USDA’s Single-Family Housing Direct Home Loan Program. USDA loans don’t technically have minimum requirements, but typically borrowers need a credit score of at least 640 to qualify.
VA loan: The Veteran Benefits Administration offers qualifying veterans, service members, and spouses VA loans, a type of government-backed mortgage. Similar to the USDA loan, the VA loan doesn’t have a minimum requirement, but people typically need a score of at least 640 to be approved.
TDHCA loans: Texas has two state-specific programs to help individuals purchase a property: My First Texas Home and My Choice Texas Home. My First Texas Home is available to all first-time homebuyers, veterans, and homebuyers who haven’t purchased a property in the last 3 years that meet certain income guidelines. My Choice Texas Home is a program for those who don’t qualify for the My First Texas Home program. Both of these programs have a minimum credit score requirement of 620.
Federal Housing Administration (FHA) loan: FHA loans require a credit score of at least 580, with a down payment between 3.5 percent and 10 percent. However, lenders with a score between 500 and 579 may still qualify if they have a down payment of at least 10 percent.

Can I get a mortgage with bad credit?

What other factors do mortgage lenders look at?

Your credit score is an integral part of your mortgage application, but it’s not the only thing mortgage lenders look at. They may also consider:

The size of your down payment
Income and savings
Employment history
Debt-to-income (DTI) ratio
Bank statements
1-2 years of tax returns
The assessed value of your home

How can I raise my credit score?

If you’re not already in the home buying process, you likely have the time to work on improving your credit score. Some actions you can take to improve your credit score are:

Paying down existing debts
Making sure you pay all your bills on time and in full, if possible
Keeping your credit utilization under 30 percent
Keeping your oldest accounts open (even if you don’t use them)
Avoiding applying for new credit, so you don’t have hard inquiries into your account

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

The post What is the credit score needed to buy a home in Texas? appeared first on CreditRepair.com.

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Using a Secured Credit Card to Build Credit

dcCred — Fri, 10 Jun 2022 18:14:13 +0000

To get the best terms when purchasing a car or house, applying for a personal loan, or buying a new phone your credit score comes into play. Together with your credit report, your score tells the seller/lender your creditworthiness. Credit rating is based on your previous debt and how you managed it.

If you have a good and long credit history, you get favorable credit terms. On the other hand, without any credit to show or a report riddled with late payments and overdue debts, you’ll attract undesirable terms or not get approved at all.

So, how do you fix bad credit? One of the ingenious ways is using a secured credit card as explained below.

What Is a Secured Credit Card?

A secured credit card is just one of the broad categories of credit cards. The distinction is that, unlike traditional credit cards whose repayment is not guaranteed, the risk of defaulting on a secured card is reduced through a cash deposit.

The limit is equal to the deposit, meaning that the issuer assumes a very small risk. Additionally, the security makes it unnecessary for the issuer to ask for a credit report or attach a cap on credit scores when applying for a secured credit card.

How Much Is the Security Deposit for a Secured Credit Card?

Typically, the card requires the holder to deposit $200 to $300. However, some cards attract a deposit of just $49. The upper limit is around $2500 or more depending on the issuer and previous use of the card. What is important is to remember that the credit line is equivalent to the amount of money you put into the card.

Tips for Building Credit Using a Secured Credit Card

For the card to make a difference in your credit scores, you need to know how to use it wisely. The factors that go into credit rating calculations include; payment history, outstanding debt, new credit, credit mix, and the length of credit history. With this in mind, here is how to use a secured credit card like a pro:

1. Choose Your Card Wisely

Apart from the security deposit, you need to consider how much interest a credit card charges. The APR for secured cards is normally high and constant. It ranges around $24% or more which is in contrast to traditional credit cards that have an APR range of around 13.99% and 24.99%.

Another factor when choosing a card is the reward terms. Such include:

Zero charges on international transfers
Cash backs on restaurant and gas station payments
Zero annual fees

2. Use the Card

Basically, once you deposit the security, the issuer expects you to start using the card. Wise usage calls for not maxing out your limit. You also need to keep a low card utilization; the percentage of the credit you are using is against your limit. The ideal credit utilization for building credit is 30% and below.

3. Make Timely Payments

The whole point of getting a secured credit card is to create a stellar credit history. As such, you have to make timely payments on the card to avoid penalties that lower your credibility. Why? As a factor in credit score calculations, payment history weighs the most at 35% of the total score.

4. Graduate to a Traditional Credit Card

If you use the card diligently, then after a year or thereabouts, your credit score will get a much-needed boost. It follows that you’ll stand a chance of qualifying for better terms on other credit lines. At such a time, and considering that you’ll have learned to use credit wisely, apply for an unsecured credit card. Also, keep in mind that the APR for secured cards is high and could be unattainable for years on end.

The Takeaway

Secured credit cards are a godsend to individuals with no or low credit scores. It is easy to apply and get approved for the card and with the right usage; you’ll see your scores improve in 6 months or so. That said, the card comes with a high-interest rate and you must pay the deposit before the credit becomes accessible.

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