Strategy to manage credit and impaired credit issues
- Middle credit scores of 500-549
- Middle credit scores 550-579
- Bankruptcy Chapter 7, 2 years from date of discharge with reestablished credit
- Foreclosures 3 years from date of trustee's deed
Build and Maintaining a Great Credit Profile
Your credit report represents how well you manage your financial responsibilities. The good news is that your negative information drops off over time but the positive information remains. Building a strong and consistent history of responsibly using credit is the foundation to building a great credit profile. Although it’s relatively easy to gain access to new credit such as credit cards, there are many best practices to use and common traps to avoid. Here are a few easy tips for effectively building your credit history.
Applying for new credit
- Don’t apply every time you see an offer. Getting too much credit too quickly can hurt your credit profile.
- Don’t build your credit profile through trial and error. Consult an expert such as a credit coach to develop a plan based on your short- and long-term needs.
- Print clearly when applying for credit. If your application information is entered inaccurately it can create variations of reported information on your credit report.
- Consistently use your complete name without any variations. Providing complete, accurate and consistent identification on your credit applications helps set up your credit history correctly from the beginning. It also minimizes the chance that your credit file will be incomplete or mixed with another consumer's file.
Once you have credit
- Pay your bills on time. Most lenders look at the most recent information on a report. So if you've paid your accounts on time for the last two to three years, the lender may weigh that more heavily than a series of late payments from five years ago.
-Set up a budget, and follow it. This is so much easier said than done! A credit coach can help provide you guidance on creating and managing a budget based on current income and debt as well as your short- and long-term credit needs. In the age of self-help and empowerment, managing your finances should top your list. The key is not to over-extend yourself.
- Develop and follow a plan for the type of credit you have, how you use it, and the type of credit you may need in the near future.
- Review your credit report periodically throughout each year
- At least 60 to 90 days before making a major purchase (such as a home, car or large household goods) you should prepare by reviewing your credit profile to help ensure it is optimized
- Continual evaluation of your credit profile is necessary to ensure you are not paying unnecessary interest expenses (i.e., you could qualify for lower rates and better terms). The average homeowners spend an estimated $300,000 in their lifetimes on unnecessary interest expenses
- Ensure no fraudulent or erroneous activity has occurred related to credit profile. An estimated one in eleven families was a victim of identity theft last year.
Getting help
A personal credit coach can be incredibly valuable whether you understand credit or not. Having a credit coach is similar to an asset manager except it’s for your liabilities. A coach will work closely with you to explain your credit profile, provide you guidance with ways you can more effectively manage it, and can help you evaluate it on an ongoing basis. Changes continually occur for all of us. Jobs change, unforeseen expenses happen and so on. If you begin to fall behind on your payments.
- Contact your lenders. Ignoring the situation will only add to your problems. Many lenders will work with you to set up a different payment schedule or interest rate. It never hurts to ask.
- Pay your bills when they're due. If you have an overdue bill, unpaid debt, tax lien or judgment, pay it off. You may find it easier to pay one affordable consolidation loan rather than several separate accounts. Your credit coach can help identify what options may be available to you.
- Stop using credit, if possible, until your finances are under control. Consider going to cash purchases only based on your budget. This will STOP the financial bleeding while you pull your credit management plan back into place.
- Look to professionals. A credit coach is experienced in explaining your credit and indentifying ways to optimize and manage debt.
- AVOID credit repair agencies. "If it’s too good to be true then it often is!" Most credit repair agencies typically charge you high prices to artificially "fix" your credit. This unfortunately often amounts to "band aid" work that manipulates loopholes in the system and often results in the credit issue returning to your credit report within months after it was supposedly fixed. If you have inaccurate information on your report, your credit coach can help you identify it and specifically provide you with the proper methods for getting it addressed.
It’s important to note that The Credit Repair Organization Act is a federal law that prohibits credit repair clinics from taking a consumer's money until they have fully completed the services they promised. It also requires such firms to provide consumers with a written contract stating all the services to be provided and the terms and conditions of payment. Consumers also have three days to withdraw from the contract.
Wall Street Journal January 10, 2015 article "How to Perfect Your Credit Score"
Don't Give Up!
Examples of loans that we do that others won't: Previous bankruptcy, previous foreclosure, previous short sale, prior modification, HOEPA/Section 32 loans, mobile homes of any age, no maximum acreage, vacant land, and zoning problems.
We are willing to take some risk and to give you a second chance through a Portfolio Loan Program. But these loans are riskier than the conventional loan so we underwrite them carefully. What does that mean to you? We don't offer prequals or preapprovals because we need to see a full application, income verification, and credit report in order to price the loan accordingly. But our conditional approval requirements are very reasonable.
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