Back to the Frequently Asked Questions Page

Bankruptcy

Bankruptcy - If you have a bankruptcy on your credit report or are in a Chapter 13 bankruptcy, you may still qualify for a loan. If you are in Chapter 13 and have equity in your home, you may be able to refinance and pay off the Chapter 13 debt. Having the 13 debt paid will help your credit score over time and you may be able to refinance at a lower rate in a year or two.

You can refinance even if you are only 1 day out of a Chapter 7 Bankruptcy with some lenders. The more recent the bankruptcy, chances are the higher the rate and possibly the more unfavorable the terms of the loan. Many conforming lenders will now consider you for a conventional loan even as little as two years out of bankruptcy. You will most likely need some very strong compensating factors to have a good chance at being approved conforming. Some examples of compensating factors are good job time, liquid assets, lowering your loan term, low Debt to Income ratios, low LTV's and many others.

If you are currently in a bankruptcy or have had one within the past few years, your mortgage options become a little more limited. You will most likely need to take a loan which carries a slightly higher interest rate with variable features after a fixed amount of time. The benefit to doing this is that you are buying your home (investment), paying your mortgage on time (increasing your credit rating) which over time will allow you to refinance into a better program which will benefit you even more.

To qualify for a conforming loan a bankruptcy must have been discharged for 4 years or more. Keep in mind if it has been less than 4 years you may still qualify for Alt A and sub prime loan programs.

Fixing Credit Report Errors - You have the right, under the Fair Credit Reporting Act, to dispute the completeness and accuracy of information in your credit file. When a credit reporting agency receives a dispute, it must reinvestigate and record the current status of the disputed items within a "reasonable period of time," unless it believes the dispute is "frivolous or irrelevant." If the credit reporting agency cannot verify a disputed item, it must delete it. If your report contains erroneous information, the credit reporting agency must correct it. If an item is incomplete, the credit reporting agency must complete it.

If you decide to fix errors on your report you should send in your proof to all 3 agencies. Don't expect an overnight fix.

Here are the names, addresses and Phone numbers for the Three major Credit Bureaus.

Equifax Credit Bureau
P.O. Box 740241
Atlanta GA 30374-0241
(800) 685-1111

Experian (Formerly TRW Credit Bureau)
P.O. Box 949
Allen TX 75013-0949
(888) 397-3742

Trans Union Corporation (Credit Bureau)
Consumer Disclosure Center
P.O. Box 390
Springfield PA 19064-0390
(800) 916-8800
(800) 682-7654
(714) 680-7292

The FCRA (Fair Credit Reporting Act) requires each of the 3 consumer credit reporting companies, Equifax, Experian, and TransUnion to provide you with a free copy of your credit report, at your request, once every 12 months. This is a new law that was imposed in December of 2004. It was started in phases depending on what state you lived in so that everyone would not overload the credit bureaus all at once. The law is not fully implemented throughout the nation. It is highly recommended that you should obtain a free credit report from each of the 3 main bureaus once per year to check for any errors or false information. You can obtain a free credit report by calling 1-877-322-8228, by completing the Annual Credit Report Request Form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281 or by visiting any of the 3 credit bureaus online. This free report will not provide a credit score for you but will be instrumental in providing you with the information that is contained in the credit report. This is the first step to fixing your credit report errors. Also, anytime that you apply for anything and are turned down for credit reasons they will provide you with a letter that explains how you can go about getting a free copy of the credit report used in the credit decision. Again this is the first step to correct errors on your credit report. The next step is to contact the credit bureau(s) with the errors listed and ask them what needs to be done next and they will explain the necessary steps for you to take. You can also do this all online after you obtain your free annual credit reports. When obtaining your free annual credit reports it is best to do each report separately so that you are able to dispute erroneous information with each credit bureau properly and expeditiously. Consult your personal mortgage professional if you should need any further help with fixing credit errors.

Don’t Ignore the Problem. If you just hope the problem of errors on your credit history will disappear, then be prepared to wait a long time. Credit information can remain on your report for as long as seven years and up to ten years in cases of bankruptcy.

THe credit agencies update every 30 days. If you Dispute an account on your credit report, the agency is obligated to respond to your request with in 30 days. With accurate proof of a faulty account, you will be able to remove that from your credit report

You can allowed a copy of your credit once a year from each credit bureau. Along with your credit report will be a dispute form.

If there is incorrect information on your credit report such as a payment that was reported late that should not have we will be able to correct the information within 3-5 days by going directly through the 3 major credit bureaus and get a re-score to reflect what your credit score should be.

If you are unable to spend the time to write the letters yourself then you might want to hire a credit repair company to do this for you. They will act on your behalf to write the necessary letters to the 3 credit bureaus. There are many companies to choose from these days and it might be in your best interest to consult with your Mortgage Broker as to which company will give you the best service.

The best thing to do to keep an eye on your credit report is to join a Credit Monitoring service such as PrivacyGuard.com they even provide a $1 trial for 2 months. You get all three credit reports with the scores included.

Often fixing the credit issues are simply too much for the average homeowner to handle. That's where I step in. Allow me to help you.

Improving your credit score can be as simple as spreading a large amount of debt on one credit card, over three or four different credit cards.

Prior to applying for a mortgage fixing all credit report errors will optimize your chances of obtaining the best financing terms available.

Some errors you believe are important to fix, will have no bearing on your refinance one way or the other.

If you find an error, the Fair Credit Reporting Act requires credit bureaus and organizations that provide information to them to correct the mistake. But you have to get the ball rolling by requesting an investigation.

It is very important when dealing with credit report problems to document everything. Document every conversation you have. Make sure you write down what you spoke about and who you spoke with.

It has been estimated that over 65 per cent of all credit reports contain errors. The key is to finding the errors on your report before you need to use the report to qualify for a mortgage or other important loan transaction.

If you are having issues with your credit and need help fixing credit report errors, or would like to know what you can do to improve your score, then do not hesitate to contact me.

It is critical when fixing errors in credit reports to first contact your loan officer and ask that a report be run calculating which items would result in the most improvement to your credit score if they were fixed. Do not pay off or attempt to fix anything before discussing the strategy with the loan officer and credit specialist, as paying for things like old collection accounts or contesting old accounts can actually reduce your fico score in the short run, jeopardizing your loan approval and potentially increasing your costs and monthly mortgage payments for your new program. Fix only the items specified in the strategy developed by the credit specialist and discussed with your loan officer, and your scores will increase, you will qualify for the program, and enjoy lower payments.

In response to consumer outcry regarding the discrepancies in credit scores from agency to agency, the three major credit agencies have created a uniform scoring system. The new system will mean that differences in credit scores are attributed to differences in the data each agency has in a consumers file, not in the way the agency generates the score.

Be very careful when dealing with collection agencies, as they often give factually incorrect information while attempting to collect money.

Most brokers work with someone that repairs credit, make sure to ask for a reference. Most credit Bureaus are offering mortgage brokers a program that will tell them how to improve you credit score quickly in order to get the borrower their desired loan.

Under The Fair Credit Reporting Act effective October 1, 1997, a credit reporting agency has 5 days from the date of receipt of a written investigation request to contact the appropriate credit grantor about investigation the complaint(s) and receive a reply back within 30 days of the original notification date. Within 5 business days after the completion of the investigation, the credit bureau (ie: Equifax,Transunion,Experian) must send a written report to the consumer with its findings with a copy of the revised report if there were any changes made.

If a credit bureau can not verify that a disputed item is correct as reported, it must modify or remove it from the consumers' file. If the trade line confirms at a later date that the information was indeed correct, the credit bureau will add the information back into the consumers' file. It will notify the consumer in writing as to the changes, within 5 days of the change.

DO NOT expect information to be deleted just because a collection account or debt has been paid. Derogatory items will remain on your report for 7 years. The 7 year clock on a derogatory item falling off your report does not start until the item has been satisfied.

The consumer must write a letter of dispute regarding the erroneous information reported by a specific credit reporting agency. The letter must reference;
Your full name
Address
Social Security number
The tramline
Account numbers
Brief statement of what is incorrect.
Copies of supporting documents (if any)
The letter MUST be sent by overnight mail, with return receipt requested. This verifies when the 30 day clock starts ticking.

Always keep copies of everything you submit and receive from the three credit bureaus in case you need to re-submit them in the future.

If you decide to let a credit repair company do the work for you make sure you research them completely. Ask for past client references and check with your states better business bureau for any complaints filed against the company. It is also important that you receive a contract that says exactly what the company is offering to do and any dates the work is quoted to be done by.

When disputing questionable items in a credit report, always remember to dispute with all three major credit bureau agencies. When applying for a mortgage, all lenders look at items reported by all three credit bureaus.

Credit Bureau errors are very common. The important thing to remember is to check your reports regularly to keep them accurate.

Make sure to keep the "acknowledgment" letters that the bureaus send to you at about 2 weeks. There is a date they have officially acknowledged they received your letters in which the 30 days in the FCRA should start.

Rapid re-scoring services are an effective, legitimate & growing sector of the consumer credit industry. The good news is that they work. But you can’t use these services directly. Companies that offer rapid re-scoring work directly with mortgage lenders and brokers, not with consumers. If you are serious about fixing errors on your credit report, contact your mortgage broker or lender and talk to them about credit repair today.

The credit bureaus are not government run agencies, but are for profit, multi billion dollar industries that make money off of selling your personal information. It is proven that they make more money off of you with bad credit, rather than good credit, so don't believe everything that they tell you in results you receive back. Make sure to spend time, in detail, looking at your results and ensuring things like the date of verification have the current date. 50% of Transunion's verified accounts have old verification dates, which means they never investigated that account, yet put verified as a result anyway.

It is up to the consumer to keep a close watch on their credit. You are allotted one free report a year. But checking your credit once a year is not enough. Experts recommend that you check your credit report before you go out looking for a loan. That means before buying that car or refinancing your home. Also, just as a rule of thumb, you should check your credit at least twice a year in addition to the times listed above. If you are not shopping for any loans, it would still be wise to check your credit every four months. Be sure to utilize the one free report from each of the credit scoring bureaus.

If a creditor verifies a previously deleted item after the 30 day window, they can add it back on. A notice of this Reinsertion must be sent the consumer within 5 days.

The "30 day rule" is a credit repair myth and is not used by knowledgeable credit repair companies or consumers. This 30 day rule only causes reinsertions if not used properly. If the bureau is forced to delete an item at day 31, then most likely most of those accounts will reappear later, with proper reinsertion notification.

The very next line in the FCRA states that if the creditor or credit bureau verifies an account late, or after the 30 day timeline, they can simply add it back on.

Your credit picture is very important and should be kept up the entire time. Do not wait until the last minute (I.E. you want to apply for a mortgage next month). Credit repair is a process and you should allow appropriate time to remove items from the bureaus

Credit reporting is an imperfect system and there are times when you're credit is tainted and it's not your fault. Equifax, Experian, and Transunion don't always report the same information.

LESS THAN PERFECT CREDIT - If you have less than perfect credit, you can get a loan.

Loan applicants with bad credit should expect to pay higher interest rates than borrowers with good credit history. Lender banks surcharge for higher risk loans.

Unless your credit is truly horrible, you can probably get a home loan. You will, however, pay a high rate of interest and your loan will likely be an adjustable rate loan with a two year fixed term. But, take that loan and start repairing your credit so you can refinance after two years into better terms. Set a budget and stick to it, stop using credit cards, and consider meeting with a financial planner who can assist with these steps.

Over the past few years lenders have come out with new programs to fit nearly every type of customer. Even if you have a recent bankruptcy there are many lenders who can approve you for the purchase of a new home, in some cases as soon as 1 day after your discharge.

Less than perfect credit can be caused by having to many inquiries in a short period of time. Inquiries account for 10% of your total credit score. If you are shopping for a mortgage, a new car, and more credit cards then the variety of inquiries will pull down you credit score more severely.

Many Americans out there think that they need to continue renting and they will never be able to realize the great American dream of home ownership. This however could not be any further from the truth. There are home loans out there for people with all types of credit and there are many mortgage brokers out there who can assist, educate, or direct consumers on what to do or where to go to help increase their credit scores so that they can qualify for financing that makes sense to them. There are many short term programs out there to assist people into getting into a home and then within a couple of years you can refinance out of the short term program into something a little more long term with much better terms. Consult a mortgage consultant now to find out what you can qualify for.

Understand that having bad credit is still undesirable. Even though you can get a loan, the terms won't be as favorable as if you had good credit. You may not be able to get 100% financing, a low rate, or low closing costs. If this is okay with you, then call me today at [phone], and I may be able to help.

If you're looking to repair your credit, you might consider a Consumer Credit Counseling agency.

Consumer counseling can hurt your credit in the short term. It will show up on your credit report. However the long term benefits should greatly outweigh this.

You can email me at [email] if you have any questions about what may or may not help to improve your scores.

FICO scores, also known as credit scores, can range from 300 to 850 with 850 being perfect.
The average score in the US is about 720.
Even with an average credit score, which usually has a few dings, you can qualify for great rates on a mortgage.

Many people assume their credit is worse than it is. Late payments are not counted as being late by the credit bureaus until they are 30 days past the due date. Making minimum payments every month does not hurt your credit score. Carrying balances on your credit cards does not negatively affect your credit score, and may actually help it if your balance is between 30% and 50% of the credit limit for that card.

Poor Credit Mortgage - If you have less than perfect credit, there may still be mortgage options available to you. Whether you are looking to purchase or simply refinance your existing mortgage, their are ways to work around poor credit and credit services that can help you boost your credit score.

If you have poor credit, you should get a copy of your credit report to make sure there are no inaccuracies. Sometimes accounts that have gone to collections and have been paid of or have a negotiated settlement will still show a balance due on your credit report. Getting errors like this corrected will improve your credit score.

Often times people with poor credit can still get mortgages. These mortgages are often geared towards paying off debt. Often after getting a mortgage with poor credit the borrowers credit score increases. This places them in better position for their next loan.

A Poor Credit mortgage is also called a Sub-Prime Mortgage Loan.

Many loans that are designed for people with poor credit are designed with the idea of working to fix the poor credit up within a year or 2 so that you are able to refinance again within a couple of years to obtain much better financing. With this in mind that is why it is very common and probably in your best interest to obtain a short term 2 or 3 year fixed rate loan (commonly referred to as a 2/28 or a 3/27) instead of a 30 year fixed rate loan. A 2/28 is a 2 year fixed rate that is adjustable for the next 28 years and a 3/27 is the same except 3 years fixed instead of 2. The rate on these ARM (adjustable rate mortgage) loans will be considerably lower than on a 30 year fixed rate.

Home buyers with bad credit history should be realistic when shopping for a mortgage. They should not expect to get the lowest interest rates advertised on local newspapers. Depending on how bad is the credit profile, the size of down payment, Debt-to-Income ratio, property type, and other underwriting factors, home buyers with bad credit history usually have interest rates 1.5% to 2.5% higher than that of the lowest conforming loans.

There are many poor credit mortgage programs. Also, your mortgage broker can get you into a credit repair program and refinance you down the road to give you better terms.

Regardless of your credit status, home ownership will give the opportunity to accrue equity and establish new credit with clean history.

Understanding that the mortgage you will qualify for will not be as good as someone with great credit. You should always look at the long term benefits as getting a mortgage now will put you on the path to a better financial future in terms of your credit and credit score. Maintaining a perfect payment history will help you refinance the mortgage into a better term mortgage down the road.

Poor credit borrowers can also expect to pay more in up front fees. This is do to the fact that your file will require allot more attention and work from the mortgage broker in order for it to close.

HOME NEWS ABOUT US PRODUCTS CALC CONTACT US LINKS

APPLICATION RESIDENTIAL COMMERCIAL FIRST TIME BUYER HELOC

FREQUENTLY ASKED QUESTIONS STATES PAGE MORTGAGE ARTICLES

FOREX FOREIGN EXCHANGE TRADING

Sitemap URL List