Credit Score Diaries: Journey to an 850 Credit Score

Tuesday, August 30, 2011

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Tuesday, May 13, 2008

3 Ways to Avoid A Credit Score Crash

Have you ever seen your credit score crash? Sometimes when you need it most?

We've all been surprised by credit reports that weren't as great as we wanted them to be.

Here are ways to make sure your credit is headed for bad news (and the ways to have good news):

1. Don't Monitor Your Credit

If you know you're going to be buying a car or home in the next couple of years, it is always good to monitor your credit so that you can know about any potential bad credit marks that might show up in advance of your big purchase.

Many purchasers of a home or car are surprised at the last minute that they don't qualify for the best credit possible. This is because their loan officer pulls their credit report right before their purchase, with little time for credit repair.

Good news: Credit Bureau monitoring services like Equifax ScoreWatch, Experian's Credit Manager and Transunion's TrueCredit will help you monitor not just one but all three credit scores from the major credit bureaus. Monitoring your score in advance can save you thousands.

2. Close All Your Credit Cards (or better yet don't apply for any)

If you have no credit cards because you closed them all (or because you never applied for them), you are actually penalized 30-50 points or more in your credit score. Credit scores are higher when the credit bureaus can see that you have been offered credit in the past. They see each credit card or line as a "vote" for your credit worthiness. It is usually good to have at least three credit cards or credit lines open. It doesn't matter if you are using them or not.

Good news: If you open credit cards, you will have better credit. Even if you are new or re-building credit, you can start with secured credit cards like those offered by Capital One, that required a security deposit. It is also easier to get gasoline cards like from Texaco or Mobil, and store cards like from Robinson's or Macy's. If you show that you pay on time you can build credit relatively quickly.

3. Don't Pay off your Collections or Debts in the Past Two Years.

When it comes to credit scores, the most recent two years mean almost everything. Even that $50 parking ticket collection that you left unpaid can hurt your credit scores if the slow pay happened in the past two years.

Good news: Paying off an unpaid collection or chargeoff can raise your credit score 30-50 points or more.

Knowing a few good credit score tips can keep your credit report clean and free of "surprises".

L. K. Hughes is the author of "Improve your Credit Score in 24 Hours", an Internet Best-Seller.

Friday, November 23, 2007

The Credit Bubble Has Burst

On the news many are talking about the Housing Bubble, but few are talking about the Credit Bubble having burst, and what that means for consumers. There is a credit bubble when lenders make it easier and easier to get home loans, but then all of a sudden "tighten their belt", requiring more down payment from home buyers, more paperwork, and a higher credit score.

In October 2007 my real estate broker told me that the loan brokers she works with now require as much as 20% - 25% down payment if you are self employed or don't have the highest credit score. This is quite a change from requiring no down payment just six months ago!.

When lenders "tighten" their belt, one way to win is to have a high credit score. On this site we have a best-selling book on how to raise your credit score in just 24 hours: "Improve your Credit Score in 24 Hours".

Monday, April 10, 2006

What the Lenders Won't Tell You: How To Negotiate Your Home Loan

Mortgage Brokers Should be Working for YOU

Most people do not know that the interest rate you are quoted by your loan broker is probably not the lowest rate for which you qualify. As a result, you may pay up to $30,000 or more on your home loan than you should. This doesn't have to happen to you, and it won't if you educate yourself about how mortgage brokers and lenders do business.

Mortgage brokers should be working for you, helping you to find and obtain the best possible loan rate for you and your situation. Unfortunately, many brokers are out there to make as much money for themselves and the lenders as is possible--all at your expense. Borrowers often do not know that there are incentives provided by lenders and paid to loan brokers for quoting higher rates, prepayment penalties, and fees. Often the interest rate you are quoted by your broker may not be the lowest rate for which you qualify. 

It Doesn't Matter What Your Credit Score Looks Like

Regardless of your credit score, you can get the best rate on your loan if you know how to negotiate. You just need to know what the brokers and lenders know about their business, the terms they use, and some of the legal guidelines they have to follow. Read on for a few examples of terms mortgage professionals use and how a borrower may use this information, regardless of their credit score, to get the best loan possible at the rates they deserve.

Know the Terms Brokers and Lenders Use the Best Rate Possible

The lender's best rate is the absolute lowest rate that can be obtained on that day to borrowers, usually borrowers applying with a high credit score. That rate is the rate that is most favorable to the borrower. This is the rate that lenders quote to brokers. It does not mean, however, that this is the rate that brokers will quote to borrowers. Brokers often state a slightly higher rate to borrowers. The rate they quote is usually enough to get the brokers a bonus from the lenders but not so high that borrowers will question the rate or see it as too high if they have been checking rates online.

There are incentives from lenders to brokers to quote you a higher rate. Brokers get bonuses from lenders based on the difference between these rates, the lowest rate and the higher rate quoted by the broker, called the “Yield Spread Premium.” You can learn how to negotiate away unnecessary high rates and fees if you know the terms mortgage professionals use.

Why Bad Loans Happen to People with Good Credit Scores and Vice Versa

People with lower credit scores can get better loan rates than some people with higher credit scores. This happens because many people with high credit scores have little knowledge about how the mortgage business works. If you don't educate yourself about mortgages and the legal terms mortgage professionals use, you may have to pay up to $30,000 or more over the life of your mortgage. The more information you learn about how to negotiate with the mortgage industry, the better rate you will be able to get, the fewer unnecessary fees you will pay and, the more money you will be able to save...regardless of your credit score.

This is an excerpt of the e-book "What the Lenders Won't Tell You: How To Negotiate Your Home Loan." Want more info? Go to

Friday, March 31, 2006

Improve Your Credit Score In 24 Hours?

If you are like lots of people these days, you are thinking of shopping for a new home or new vehicle loan. Why? Because interest rates are still the lowest they have been in 40 years, and now is a better time than any to get financing.
I just bought an RV myself, and I remember the nervous feeling while they pulled my credit score at the dealer. 668 *whew*. Not bad as it turns out.

Many people don’t plan ahead and pick up their credit score before shopping for a loan to get the best credit possible. A lower credit score (one below 620 or even 650) can mean the highest interest rate and highest monthly payments. A score of above 720 means the lowest rates possible. Having the best credit score you can have means saving thousands of dollars over the life of your loan. How can you raise your credit score in a quick period of time, and save?

There are several ways to improve your credit score in just a day, or even hours. One is called the "rapid rescore" process, offered through your mortgage officer only, by a company called Access. With this system, you must do legwork to change your credit report contents yourself.. So for instance, you might
have to pay off certain collections or liens and call the credit bureau to change your credit report contents. The rapid rescore process gives your credit score a second look within a day or two so that any improvements will show on your second credit score. The drawbacks of this process if you can only do it through a mortgage broker, and also, you must have something that you can improve quickly on your report such as paying off a collection or a card balance.

Another way to improve your credit score quickly is to use techniques to temporarily "bump up" your credit score. I talk about these in my ebook "Improve Your Credit Score In 24 Hours". I also provide special phone and fax number info for credit bureaus. Depending on
which creditors and credit bureaus you use you can many times cause your credit a temporary "boost". Techniques like this are a great "survival skill" in your credit career. I think they are the best because they work no matter what's on your
credit report.

People are getting more financial savvy these days with gurus like Suze Orman telling folks about their FICO scores (another term for credit scores). I
think it is good because having credit knowledge before you make large purchases for things like homes or cars can save you thousands of dollars and put more money where it belongs, your investment future.

Good luck with Improving your Credit Score!

L. K. Hughes is a Credit Repair Specialist and the
author of Improve Your Credit Score in 24 Hours

How To Have Lenders Begging To Give You Low Rates

We have found several things that everyone must know about their credit and money in 2006, and one of those things is you can have lenders begging you to give you the lowest interest rate loans even with bad credit.

Tip: Find A Motivated Lender

One of the best things that happened to me while looking for a loan is I walked into Full Spectrum Lending. Full Spectrum Lending is a direct lender, that means their loan officers are not commissioned salespeople. But even better, they were looking for me. That is because some lenders have a surplus of money and are dying to lend to you. They are more negotiable than ever, and can save you thousands on rates and fees just to get your business. How did I know that Full Spectrum was motivated to lend money? They were advertising, and that’s the secret. Motivated lenders advertise. I will talk more about that in a moment. First let me tell you what kind of deal they made with me.

1) I got a better rate on a loan, 5.85% five year fixed.
2) They were willing to lend on a triplex.
3) They said I was eligible for two different programs, which both allowed a credit score down to 580, I had a score of 620 at the time.

Full Spectrum Lending offered two fantastic loan programs and they both had an interest rate of less than 6%. Remember, this was not even a conforming loan, this loan was on a multi-family property which often commands a higher rate. In addition, I’m self-employed, another situation where lenders tend to offer higher interest rates. Even in my case they wanted no documentation, not even a bank statement. I didn’t have to give them anything, and they asked for no points. So I asked, “How can you offer this rate with no points?” The only thing I had to pay upfront was private mortgage insurance (PMI) and because now more banks want you to pay that upfront anyway, I was willing to do this. Banks want you to pay PMI if you put less than 20% down. So, no cost, no documentation, self-employed, multi-family property, 5.85% five year fixed. This is a property that I intended to change into a condominium and sell fairly quickly – a short term investment. This is a fantastic loan with a 620 credit score. And how did I find it? Because Full Spectrum is looking to lend, they’re advertising, so they’re putting themselves out there. The point is that you want to find people that are looking to lend. Anyone looking to lend is advertising this fact. Which brings me to the next topic:

Where To Find Lenders?

I just gave you one name, Full Spectrum Lending, they’re an arm of Countrywide, which is the largest mortgage lending institution in the country: they are a bank. Full Spectrum Lending is a direct lender, they are directly tied to the money, not just a broker for another lender. When you talk to people at Full Spectrum Lending you’ll be talking to people who are not on commission who are ready to work for you and get you the best deal possible. They were doing a lot of advertising, in early 2005, for 2006. Who’s Advertising? Let me mention a few companies that are currently advertising for your business and I am sure they will sound familiar to you. Ditech is a direct lender, they have a national calling center. If you go to them for a second mortgage they may want to low ball the appraisal, and that’s no fun. But, for a first mortgage they’re a good company. GMAC, the General Motors credit company, bought a company in California called Call Direct, and they’ve been advertising. Call Direct is a direct lender. Ford Motor Company also went into the mortgage business, they just bought one of my home loans from Greenpoint. Greenpoint is an aggressive company and they are looking to expand right now. Greenpoint has some interesting programs, they specialize in loans that allow you to pay back your mortgage faster. (We’ll talk about paying off your house quickly in a moment.) Greenpoint is another company with their own money, and their own sales, so you might want check them out. If you do, go to that’s their web site. You always know when a company is advertising heavily. They flood television and radio with ads and put up billboards all around town. You often try to tune it out, but it if you are looking for a lender who is motivated to lend, pay attention and look and listen to those ads. In my real estate career, doing exactly this has saved me a lot of money, not to mention time and effort.

When I was in my 20’s and I bought my first condo in Los Angeles, I did a lot of driving as most Angelenos do. There was a company called Gibraltar  that eventually got bought up by Countrywide and they always had a lot of billboards. So that is where I went, and I ended up with a very good rate and almost no hassle. Look in your town at the billboards to see who is advertising, who wants to loan you money. Often they are direct lenders - like a savings and loan, but without a banking business to support their loan operations and bring in customers. They are really hoping you will come to them and they will give you a good deal with less paperwork.

Credit Unions and Banks

Another place to look for a loan is at your credit union. Credit unions also often advertise and credit unions can offer a super deal. What I’ve found is that credit unions are a little behind the times concerning self-employed customers.  Sometimes they can make the requirements more rigid for those people. But if you have a job, and you’re banking through this credit union – they can really be a good source for home lending. I tend to stay away from traditional banks such as Washington Mutual and Wells Fargo, large banks here in the Northwest, although they are getting more creative and aggressive with their lending practices, especially about having more stated income loans. A stated income loan is when you don’t have to provide a lot of detail, like tax statements or income verification. Often you are just required to provide 12 or maybe 24 months of bank statements. Sometimes, you can get stated income loans where only two months of bank statements are required. (Remember, I went into Full Spectrum Lending, and they required none at all.) If you have a good credit score (650+), and traditional banks tend to be conservative about credit scores, you can get a good deal through one of those lenders right now. The best tip I can give is to tell you to watch for who is advertising. This past year it was Full Spectrum, and Ditech and some of the other ones, just always be aware so you can benefit from this really good tip.

Wednesday, March 29, 2006

Shop Around, But Don’t Get Your Credit Pulled

Many consumers just fall into something without shopping around. For instance, if you call Ameriquest, a company that specializes in customers with less than perfect credit, they have a tactic to prevent you from shopping around—they pressure you to give your social security number and run your credit. Ameriquest has very aggressive brokers, and they will convince you that you must give them your social security number and your information saying they will not talk to you without pulling your credit report. The best thing to do is to find a lender who is considerate enough of your credit, your credit score, and your financial situation to just give you a good faith estimate of everything they can do for you. All the fees, everything right up front on a good faith estimate, with no credit score. If a lender is really considerate of you, that’s what they’re going to do.

The people I have done business with have not asked me for my social security number up front, they have told me what they could do for me. And that’s how you shop, you don’t want to shop by just giving your social security number to everyone, and having them all pull your credit report and lowering your score each time that is done. You want to be able to tell people “look, I will do business with you, if you can tell me what you can do for me.” And make them give you a good faith estimate. That’s a full estimate of everything, a complete break down of costs; the appraisal, the PMI, that’s if you’re putting less than 20% down. A lot of loans don’t even have PMI, but they sort make you prepay as an upfront cost. But do negotiate to see what they can do.

Remember that the best way to negotiate is to not negotiate at all, but to just know which lenders to use, the ones that are really looking to get your business, and are advertising. Find lenders with good programs in our "MUST HAVE AUDIO" for 2006.

You Can Get A Good Loan With Bad Credit

I recently got a loan for a triplex for 5.85% five year fixed, with no fees, no prepayment penalties, no documentation, and this loan was available with a credit score down to 580! You don't have to have great credit any longer. The trick is knowing which lenders to use. They are usually "direct lenders", lenders with fewer commissions because they directly own the funds for your loan. They are also usually lenders that have "money on sale", lenders that are desperate to unload all their excess funds. We provide names of some lenders with really good programs in our "MUST HAVE AUDIO" for 2006. Don't settle for less than the best ever!

The best way to find these companies is to see who’s advertising. A couple of years ago, Ameriquest was advertising a lot, and they specialize in sub-prime loans, or loans where people don’t have the best credit score. When a company’s advertising to lend, that’s a great indicator that they really have a lot of money. Banks borrow the money at the federal funds rate, which is, 3.5 to 4% right now. Some of them have a surplus of reserve funds, So, they advertise to get more customers. Most consumers don’t notice advertising as a subtle sign that a certain lender has better deals.

It is estimated that 70% of all the loans are being written through commissioned third parties—mortgage brokers or loan brokers. In the Northwest they have names like Pacific Mortgage, or Pacific One Mortgage. These mortgage companies advertise in the paper and have commissioned salespeople. Personally, I don’t like to deal with broker firms. These people are experts at talking you out of a good interest rate because they put food on the table by talking you out of the lowest rates.