By Guest Blogger, Corey Goldstein
What is deeply concerning is that 20% of all mortgage loan applications do not meet new QM (Qualified Mortgage) safe harbor rules that go into effect in January. The impact is that more than 50% of all loans will now not be eligible for purchase, insurance or government sponsored guarantees.
What this means to borrowers is that under Dodd Frank, they must prove eight aspects of their ability to repay and one critical component will bounce a loan immediately, that being credit score. QM, which takes affect Jan 10, 2014, will most certainly affect future buyers. Preparing buyers in advance and maintaining communication throughout the pre-buying process may become a wise structure to put in place. .
Here are my best-proven ways to increase your credit score 90 points or more in 90 days or less:
First, you will need to learn exactly what the credit bureaus “have on you”. Avoid online credit reports, such as credit karma, free credit report.com, and even reports directly from the credit bureaus; they are not FICO based products. If you’re applying for a loan or mortgage, your lender can provide you with a copy of your credit report that includes all three credit bureaus, or ask your banker to provide you with one.
#1 – Focus on the middle score and the high score.
The low score is immaterial and if it’s especially lower than the middle score. If you’re low score is that much lower than your middle score, then it doesn’t make sense to invest $1 in bringing up your low score to become your middle score. The cost associated with it may be far too great. The time associated with it may be far too long. Speed is what’s needed here.
#2 – Focus on the most recent problematic or derogatory accounts on your report.
Here’s what to look for:
- Items on your credit report that got listed late within the last 12 -24 months.
- Scrutinize and evaluate each individual account or trade line on your credit report.
Here’s why: FICO was designed as a predictive model to help creditors determine the probability of this person filing bankruptcy, and this account being a total loss. Therefore, a recent late payment when there was previously no late payment, could easily be 50 to 90 points in increase, once deleted from your credit record.
#3 – Yes its counterintuitive, but if you pay off those collections, your scores will drop 50 points!
The credit scoring system is designed and built to have you fail. There are actually 96 ways to report an account negatively, but only 6 ways to report positively.
Here is a very counterintuitive part: You think that if you are restoring your word where you previously were able to honor it, that it would be a good thing. It’s not, it’s just the opposite. You have now just provided confirming evidence to the credit reporting bureaus that this account was legitimately late – as a result your scores drop.
#4 – How to add up the potential score increases you’ll get from the actions you take:
So, how do you know which are going to give you the greatest score increases to reach those 90 points in 90 days? Here are some good rules of thumb:
Negative items listed on your report that are in excess of 36 months old, will on average yield 8 to 12 points on removal. So, if you need 8 to 12 points to complete your transaction, then you know exactly where to go. By contrast, a negative item listed on your credit report from 2013 could easily impact your credit score 50 to 125 points. Late payments on mortgages, where no late payments had ever showed up before, could easily be 125 -150 points.
Surprisingly, tax liens don’t impact your scores that much. A recent client of mine had a $75,000 tax lien showing up on her Experian report, yet her Experian credit score was high score!
#5 – How to have your creditor do what you want them to do, willingly!
In order to hit 90 points in 90 days, you will need to delete on average three accounts that were either late or in collection. Initially, when you call the credit bureaus, only speak to Level 1 customer service people. They are very limited as to what type of activities they can do, but you can learn where the major problems lie.
Ask questions about your account. They will immediately try to switch you over and move you away to some other person, but tell them “no”. Instead, gather information from them.
Do not ask the Level 1 representative about the removal of any derogatory late payments; they can’t help you there. Instead, try to understand how that creditor came up with their answers of listing you late. Begin addressing each individual late payment item by item.
Then after your call is complete with the customer service representative, ask for a supervisor. Ask for a fax number or e-mail address to send any supporting documentation information to remove the late payments and negative credit for history that’s holding back the scores.
Both FixMyReport.com and GivingYouCredit.com have been working directly with loan originators, Realtors, tax experts and consumers for 9 years. During this time, we have helped close more than 6,000 loans, totaling more than $2B in real estate transactions
GivingYouCredit.com is a fully integrated credit repair software solution, designed for people preparing to buy a new home in 4-8 months or longer. Users receive immediate access to a robust database packed with prewritten letters, tools to handle collection matters, stop harassing collection calls and an outstanding “dispute tool”. The one-time membership comes with three free valuable e-books, online organizer and direct links to the credit bureaus and other resources to support you in increasing your credit scores.
FixMyReport.com is a highly specialized, “fully done for you” concierge boutique approach, towards resolving complex credit and real estate concerns. FixMyReport obtains accurate and verifiable documentation directly from creditors that permanently deletes and modifies their past payment history – regardless of accuracy.