Archive for the 'Credit And Financing' Category
Pensacola Real Estate News: What is a FICO score?
January 18th, 2008 Categories: Credit And Financing
A FICO score is a credit score developed by Fair Isaac & Company, Inc. Credit scoring is a method of determining the likelihood that credit users will pay their bills and not default on the loan. Credit scores range from 350 to 900, with a higher number being better. If you are looking to borrow money to buy real estate in Pensacola Florida, your credit scores will have an affect on how much you can borrow and what the interest rate will be. 
Fair Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrower’s credit history into a a single number. Exactly how these scores are computed is a secret that Fair, Isaac & Co. and the credit bureaus do not reveal. Secrecy in determinining rankings didn’t start with Google search engine algorithms. However, we do know generally what type of activities raise and lower credit scores.
Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves years of studying how hundreds of thousands of people have used credit.
There are three FICO scores computed by data provided by each of the three bureaus - Experian, TransUnion and Equifax. Some lenders use one of these scores, most lenders may use the middle score and some will use whats called a blended score.
Related Articles on Pensacola Real Estate News:
Your Credit Score - The Key To Building Your Future Wealth
The New Credit Scoring System - How Will It Affect Your Credit Scores?
How Not To Lose Your Home Loan After You Are Already Approved
Click on Pensacola Real Estate News for a list of articles indexed by category.
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Pensacola Real Estate News: Your Credit Score - The Key to Building Your Future Wealth
January 14th, 2008 Categories: Credit And Financing, First Time Home Buyers
It seems today as if everyone wants to know your credit score. Lower credit scores cost you in more ways than you may be aware, not just failure to be approved for a real estate home loan. It can all add up to big savings or losses for you, depending on how responsible you are with your credit.
I will show you how low credit scores hurt your chances of building long term wealth. And everyone knows real estate is a key factor in building long term wealth.
As a real estate agent in Pensacola Florida, credit scores are extremely important to me. Helping my Pensacola home buyers get the highest possible credit score makes the home buying process much easier for my clients. If your credit score is not where it needs to be, the time to start building your credit score up is NOW!
Having a higher credit score is critical to building your wealth. To build wealth, you need to keep your money instead of paying it out and receiving no real value in return. Read on to find out how your future wealth is directly related to your credit score. (It is also directly related to your outlook on life, but that is a whole different series of articles yet to be published).
Who cares about your credit scores? Just about any entity that wants your money.
1. Lenders - If you want to borrow money for any reason, lower credit scores will mean higher interest rates. It also makes for a more complicated loan approval process. The lender will ask you to dig up much more documentation than a person with a better credit score will require. Let’s look at how much low scores can actually cost you. In this example, we are looking at a 30 year fixed rate loan of $100,000 at varying interest rates. (The monthly payments shown are principal and interest only. They do not include taxes and insurance).
The numbers in the table show how higher credit scores can save you thousands in interest. Just a 2% difference in the interest rate can add up to almost $50,000 in savings over the life of a $100,000 loan. For a $250,000 loan, the savings is over $120,000 for the life of the loan.
2. Insurance companies - Whether it is home or auto insurance, insurance companies are now factoring in your credit scores when determining your premiums. With home insurance premiums at ridiculously high levels in Pensacola and all along the Gulf Coast, you need every break you can get. The reasoning is that people with lower credit scores are less responsible with their home life and their driving. Did you know that just a couple of late payments could cause your premium to be doubled? Add that to the increased monthly payments in the table above.
3. Employers - A low credit score can cost you a great job.
Employers equate low credit score to irresponsibility. They want dependable responsible employees, so they are apt to hire people with higher credit scores. They don’t take into account that many low credit scores are the result of a hardship that was out of the control of the individual.
4. Landlords - Any knowledgeable landlord checks the credit scores of all applicants for rental properties. Lower credit scores equal more application rejections, and higher deposits if you are accepted.
5. Credit card companies - Lower credit scores mean lower credit limits and higher interest rates.
6. Utility Companies - Lower credit scores mean higher deposits when you order utilities such as electric, water, gas, phone service or cable service.
As you can see, lower credit scores can cost you in many ways. Add all of these factors together and you could end up paying thousands of extra dollars a year and receiving absolutely no added benefit in return.
One of the primary vehicles for long term wealth accumulation is home ownership. At the National Association of Realtors (NAR) Mid year meeting in 2007, Laurence Yung, the Chief Economist for the National Association of Realtors, shared the following data from the Federal Reserve: “The median wealth accumulation for renters from 1995 to 2004 was $4,000. The median wealth accumulation of a homeowner was $184,000.”
How do you want your financial picture to be 10 years from now?
Don’t wait. Start now to build your credit scores, buy a home, and invest in your future.
Related Articles on Pensacola Real Estate News:
The New Credit Scoring System - How Will It Affect Your Credit Score?
How Not To Lose Your Home Loan After You Are Already Approved
Click on Pensacola Real Estate News for a list of articles indexed by category.
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Tips On How Not To Lose A Home Loan After You Are Already Approved
November 14th, 2007 Categories: Credit And Financing
Many Pensacola home buyers do not realize that approval for a loan does not guarantee they will get the loan. Buyer behavior after getting the approval can cause the loan to be disapproved by the lender. This can often happen right before closing and ruin everyone’s day.
Remember, your loan approval is based on your current financial and credit status as of the date of the loan approval.
Your lender will check your credit again before closing, and if the lender sees that your financial condition or credit rating has changed, they can refuse to grant you the loan.
Keep these tips in mind for ensuring your loan stays approved.
1. Do Not Apply For Credit For Any Purchases - This is critical. If you apply for credit to purchase any products, such as automobiles or home furnishings for your anticipated new home, your credit report will reflect that you have applied for credit. Having this extra credit can disqualify your loan. This also includes getting new cell phones and “no payment for xx months” type of deals. Try not to let your credit be pulled for any reason whatsoever. 
2. Do Not Apply For Any Credit Cards - This includes department store or home improvement store charge cards. As far as the lender is concerned, you have just increased your monthly expenses. Even if you don’t charge anything to the card, you have that credit available, and that is what the lender does not want to see.
3. Do Not Make Large Purchases On Credit Cards - Large purchases decrease the amount of available credit you have, and will thus decrease your credit score. Wait until after closing to buy that big screen TV or new riding lawn mower.
4. Do Not Allow Credit Line Increases On Your Current Credit Cards - Increasing your credit lines can have a negative affect on your credit. If any credit card company offers to increase your credit line, tell them to hold off until after you have purchased your new home.
5. Do not close any existing credit card accounts - Credit card accounts that have a good history of payments are good for your credit score. Leave these accounts alone. By closing credit accounts, you are effectively decreasing your available credit, which will decrease your score.
6. Do Not Make Any Large Deposits or Withdrawals From Your Bank Accounts - Many lenders get very suspicious regarding funds being deposited or withdrawn from bank accounts that are not considered “ordinary” based on their research of your credit and banking history. But why would they worry about a large deposit? Good question. Suppose that deposit was from a loan made to you. You would now owe more money than when you applied for the home loan.
Here are some examples of clients of mine who were buying homes in Pensacola and almost lost their loan approvals.
I had a client who was moving and had a garage sale. The client made over $1500 at the garage sale. He promptly deposited this money into his bank account. When the lender asked for updated bank statements prior to closing, this $1500 threw up red flags for the lender. The concern was that someone may have loaned my client cash to help buy the house. The client had to explain what happened and assure the lender that he had received no funds that had to be paid back.
Another client decided she would celebrate the purchase of her new home (before closing) by purchasing a beautiful new diamond ring. She opened up a new installment account with the jeweler. The lender noticed this prior to closing and was ready to disapprove the loan. Fortunately, my client was able to get a full refund for the ring and close the installment account.
The best advice I can give is that after being approved for a loan, simply don’t make any large purchases or apply for any new credit of any kind. Also, ensure that your bank statements do not reflect any unusual activity.
Keep the lenders comfortable until closing. After closing, you can do as you please.
Note that the advice given in this article is strictly for keeping your loan approved. If you are looking to increase your credit score for a future home purchase, these guidelines do not apply. An article on increasing your credit score is coming soon.
Click on Pensacola Real Estate News for a list of articles indexed by category.
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How To Stop The Credit Bureaus From Selling Your Private Information
November 4th, 2007 Categories: Credit And Financing
Credit bureaus are in the business to make money. And they have found that they can make a lot of money selling your private information.
But I’m here to show you how to prevent that from happening.
Did you know that when you apply for a mortgage, the credit bureaus are notified that your credit is being pulled?
And did you know that there are mortgage companies out there just waiting to buy your personal information after your loan officer runs a credit report on you?
After applying for a new mortgage, don’t be surprised if you get phone calls (probably right at dinner time) from mortgage companies trying to get your business.
There are many great mortgage brokers and loan officers in the Pensacola area who can provide you with top quality service and great values in mortgages. Contact me if you are in the market for a new home in Pensacola, and thus a new mortgage, and I can refer you to some great professionals. These are local people you can trust.
Don’t put your trust in the mortgage companies that are buying your private information and calling you. Shut them out of your life. Here’s how.
You need to “opt out”.
Go to http://www.optoutprescreen.com
Once at the site, you can “Opt out” for 5 years by filling out the forms online. Or you can opt out for a lifetime by actually mailing in paperwork.
Again, if you plan on applying for a mortgage in the Pensacola area, feel free to Contact Me. I can put you in touch with some great lenders you can trust.
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