The Truth About Dispute Statements/Notations On Credit

In the past few years financing rules have become more rigid when it comes to consumer dispute notations on credit. What is a consumer dispute notation?  When a consumer disputes information on credit a dispute note will be placed on the account in question. Initially, when a negative account is disputed it may very well be taken out of the score formula or at least cause increases in credit scores until verification by the creditor and the credit bureau is complete. 

This also applies to good accounts that have been disputed. If the account is a positive trade line the pending dispute could have the opposite impact and reduce scores. When the initial verification is complete the account will either be corrected or verified as accurate. At that point the dispute notation will be removed and the account will then be fully factored into the score. If the consumer continues to dispute the account after the initial verification a notation is placed stating the consumer disagrees and disputes the information on the credit report. This can also alter the score.  

Most loans will not be approved by a lender or will be kicked into manual underwriting if a consumer dispute notation is pending or unresolved on credit. Lenders are very aware of how these statements can change scores and most have rigid restrictions about what they will accept when approving financing. Most mortgage professionals are aware that a consumer dispute notation can inhibit their ability to get a loan closed but don't really know why.

Lenders want to price loans correctly with the level of risk the borrower reflects. An accurate score prior to pricing and extending financing is their primary concern which is why removing and/or resolving consumer dispute notations on accounts prior to getting a loan is so important. 

A high quality credit repair company will explain this to loan officers when they have completed changes to an individuals credit and will remove any dispute notations before giving the applicant approval to begin the mortgage process. Unfortunately, there are many dispute factory type credit repair companies out there and even consumers that randomly dispute information with no strategy or foresight into how these dispute notations will impact the loan application. Mortgage professionals need to make sure the lender will approve financing if they plan on submitting an application with these open statements on credit.  If a loan officer pulls a credit profile and sees consumer dispute notations they should make the applicant aware of the need to have these notations removed or resolved.  In many cases it is quite difficult and confusing for the layman to address these issues on credit. Feel free to reach out to us for assistance.

Call us  at 877-292-0656 with any questions or feedback on credit challenged clients or credit in general!

Making sure credit is analyzed with future real estate purchases in mind is a MUST before taking an action that can foil those plans and limit a consumers options for a better quality of life. 

"Guiding you from financial distress to financial success"

2014 Brings Higher Rates And A Need For The Best Credit Scores

As 2014 unfolds we are seeing higher rates and pricing on financing. We are also seeing a resurgence of subprime lending. So although it seems most loan applicants will be approved for financing, many may be paying much more due to higher rates and points. If an applicant's scores are under a FICO score of 740 pricing could be substantially higher. When costs increase something has to give, and this may very likely be a reduction in the loan amount.  Since it is a sellers' market these days and inventory is down buyers must arrange to get the best pricing and interest rates to afford the loan amount needed for purchasing a property.  Sellers want to know that they are dealing with a viable buyer before taking their home off the market.  Preparing credit, income, and debt ratios well in advance could make the difference for purchasing a bigger/higher priced home and living in a more desired area with a preferred school district. 

Realtors, bankers, CPAs, and financial planners should educate their potential and current clients about these changes and how to put their best foot forward when getting ready for a real estate purchase.   Buyers must lay the ground work well in advance by building the best credit scores and correcting any errors, delinquencies, or balance discrepancies reported that are interfering with their credit score goals.  Understanding the rules and having the right professional take control of the credit repair/education process equals happier buyers and more closings. 

With the CFPB cracking down on credit bureaus, creditors, and banks, many dispute-factory type credit repair companies are finding less and less success for their clients. These credit repair companies are churning out factory-type letters to dispute credit, and in turn the bureaus have become much more sophisticated and smarter to combat it.  Since we use a sophisticated and unique individual credit repair strategy for every credit profile and account our success ratio continues to be excellent unlike the other credit repair companies.   

Besides changes in rates and pricing, many bankers are experiencing road blocks to loan approval when the bank finds open "consumer dispute statements" listed on credit accounts.  Banks do not like "consumer dispute statements" on credit since it means the account in question is taken out of the FICO formula, leaving the bank with a false score and therefore no real sense of the loan's risk. This is why banks want these statements removed or resolved before loan approval is compete. There are a few reasons why these dispute statements remain on credit.  First, if an unsophisticated credit repair company was hired to dispute information on credit with the bureaus they usually have limited success and whatever accounts remain on credit may still reflect an open dispute status. These companies don't always take the time to remove the open dispute statements. Another common reason is that some consumers try to fix their own credit and due to limited knowledge are usually unsuccessful and the consumer dispute statement is never removed.

Feel free to reach out to us at 877-292=0656 if you have any credit questions or reports you would like reviewed!  

"Guiding you from financial distress to financial success...so Make Precision Your Decision" 

New Score Model To Be Introduced To Help Some Credit Scores But Doesn't Mean It Will Be Used By Mortgage Lenders

	New FICO 09 Score Model Will Be Introduced in the Fall, but why Won't Mortgage Lenders Be Using It?

FICO, the leading credit score model used by lenders and creditors, announced the new FICO Score 09 model which will be released in the fall.  The model will be used at the consumer myfico site and possibly by car lenders and credit card grantors.  Amongst other changes, the major difference for this score is in medical collections. Under the current models used by most mortgage banks, medical debt collections can be very damaging to consumer credit scores.  Medical collections are popular causes of credit score drops that occur for a variety of reasons.  A recent study by Trans Union revealed that 54% of insured individuals are confused about medical bills. Credit scores can drop hundreds of points from one collection, and most people do not understand how easily they can be put in this vulnerable position.    However, the new FICO score will place less emphasis on this medical debt. People with medical collections that are paid off will see the highest raise in their credit score, and those with unpaid collections will see some damage lifted off their report. According to FICO, consumers who solely have unpaid medical debts as major derogatory references could see a median score increase of 25 points. Even though this sounds great for people with medical debt, they will not be in the clear after this summer if they are looking for mortgage approvals. FICO’s last version, FICO 8, was released in 2008 and has only recently been adopted by a small amount of lenders. To date the majority of merged credit reports we view from mortgage banks use the FICO 4 , 5, and V2 models.  Banks tend to be very conservative with lending, especially for large loans like mortgages. Just because a new score is out doesn’t mean it will be used by mortgage lenders, and it is highly unlikely that banks will adopt a credit score which ignores unpaid collection accounts. Mortgage professionals and realtors must educate their referral sources and clients since many may assume if they wait until the fall their credit scores will increase and they will be approved for loans at lower pricing.  This could cause buyers and refi applicants to avoid fixing their credit and wind up delaying transactions only to be disappointed and frustrated. Fannie Mae and Freddie Mac are still using the older versions of the FICO score models in their own underwriting software. Fannie and Freddie have not expressed any intention of changing to the newer less conservative models but said they were confident in the tools they currently use. Unfortunately this will cause confusion in the fall. When ordering FICO score from the consumer site, individuals have to be mindful that it may be even more inflated than the past FICO 8 version was. Individuals must understand the myfico site model does not accurately reflect what lenders see.

Having Many Credit Cards And Accounts Can Decrease Scores For Some While Improving Scores For Others. How Can This Be?

HAVING MANY CREDIT CARDS AND ACCOUNTS CAN DECREASE SCORES FOR SOME WHILE IMPROVING SCORES FOR OTHERS. HOW CAN THIS BE?

When it comes to credit scoring, many score reactions are a paradox. What might increase scores for one individual can actually reduce scores for many others.  Having a variety of credit with a nice mix of credit cards, store cards, mortgage accounts, student loans, and car loans/leases over long periods of time can build a strong credit portfolio and high scores. When a consumer has a well-rounded credit portfolio with aged accounts that have stayed current it reflects great credit management skills which adds points to the credit scores. Juggling and building a lot of credit over long periods of time, without delinquencies, shows lenders that the credit holder is a responsible and seasoned borrower with a low default risk.  On the other hand, if a borrower has been in the credit game for 6 years and opened 4 new accounts in the past 3-6 months this borrower would be seen as a much higher risk and the scores would be lowered. When a young credit holder (age of credit determined by the date their first account was opened) has doubled the amount of credit accounts within a short period of time it can be viewed as too many accounts and become cause for concern. Since this individual has limited experience managing credit and has doubled his accounts the score must reflect their new greater risk of default. Naturally scores will be lower.  For example: Let's take consumer A&B and have a closer look at exactly what their credit reflects: Consumer A is 53 years old and has been developing credit for 35 years.   Her FICO Score is an 820 which is amazing and she has never had a delinquency. These are the accounts on her credit report: -  14 open and active credit cards including store cards, master, visa, and amex.  -  Credit card limits equal to $120,000. -  3 closed credit cards that were opened over 28 years ago . -  A balance-to-limit ratio on revolving credit of 5%    -  A current mortgage that was opened 8 years ago.    -  A closed mortgage that is still showing on her credit report that was opened 26 years ago. -  3 car loans/leases that are paid and closed. -  1 current car loan that was opened  3 years ago. -  No third party credit reviews in the past two years.     Consumer B  - a 29 year old who has been developing credit for 6 years.  His credit FICO score is a 620 and he has no delinquencies. The accounts on his credit report are: -  7 open and active credit cards including store cards, master, and visa cards. -  3 of the cards were opened 5-6 years ago and 4 were opened in the last 3-6 months. -  Credit card limits equal to $10,000. -  A balance-to -limit ratio on revolving credit of 20%. -  1 auto loan opened 4 years ago . If Consumer B had kept his credit accounts down to only 4 (excluding the 4 new credit cards) his score would have been anywhere from a 680-710. When applying for a mortgage the difference between a 620 and 680-720 could mean enormous savings on fees, insurance premiums and interest rates, or the difference between being rejected or approved depending on the loan.  For this individual going from 4 to 8 accounts in 6 months signified too many accounts for his credit level and dropped scores dramatically. But for Borrower A, the credit experienced individual with many years of developing varied types of credit, the 16 open and active accounts are not reflective of too many accounts on credit and delivered amazing credit scores showing a low risk of default. Using a strategy for developing healthy credit scores and variety of credit with a timeline of your goals can make a world of a difference for your success. Feel free to reach out to us if you have any credit reports you would like reviewed or any credit questions! You can contact us at 877-292-0656 or email us at info@precisioncreditrestoration.com.

Find out how you can offset the new 2014 mortgage regulations with an excellent credit score!

As of January 10^th, the new mortgage regulations will further restrict debt to income ratios for those purchasing real estate and looking for mortgage financing. These ratios will be reduced which can lead to diminished buyer borrowing power and cause lowered loan amounts offered by banks as well as more rejections. Lenders will become legally liable/open to law suits if they extend financing to those who do not fit into the new regulations and wind up defaulting on loans. According to Compliance Ease, a leading provider of intelligent business solutions to financial services institutions, who did a test trial of the new regulations in 2013, one in five current mortgages would not qualify under the new rules.

With the combination of rates increasing and tighter regulations on financing, buyers will need to prepare their proof of income, debt to income, and the best credit scores possible well in advance if they want to achieve their financing goals.  It is not just about getting loan approval but also qualifying for the right amount of mortgage needed and the best pricing. As a professional, teaching potential clients and referrals about these challenges will cause less disappointment/frustration, more success, and savings of hundreds of thousands of dollars for the real estate transaction or refinance.

With the appropriate income, debt to income ratio, and a credit Fico score above a 740 threshold borrowers can qualify for the best pricing.  This could mean a savings of 1% or more in interest over the life of the loan which could increase the buyer's purchasing power. Saving 1-1.5% in interest on an $800,000 loan comes to over $400 a month in savings and almost $200,000 over the 30 year term of the loan. As you can see having a better credit score is a way for buyers to gain more purchasing power in this highly restricted mortgage environment. To achieve the best credit scores individuals must order, analyze, and improve credit well in advance of loan application.  

Let the credit repair experts at Precision Credit Restoration help you along the path to a brighter financial future.  Let's achieve these goals together.  Please feel free to give us a call for a free consultation at 877-292-0656 or visit our website for our free report which reveals our top secrets on how to sky-rocket your credit scores at www.precisioncreditrestoration.com.  You have nothing to lose and everything to gain!

The Truth About Dispute Statements/Notations On Credit

In the past few years financing rules have become more rigid when it comes to consumer dispute notations on credit. What is a consumer dispute notation?  When a consumer disputes information on credit a dispute note will be placed on the account in question. Initially, when a negative account is disputed it may very well be taken out of the score formula or at least cause increases in credit scores until verification by the creditor and the credit bureau is complete.

This also applies to good accounts that have been disputed. If the account is a positive trade line the pending dispute could have the opposite impact and reduce scores. When the initial verification is complete the account will either be corrected or verified as accurate. At that point the dispute notation will be removed and the account will then be fully factored into the score. If the consumer continues to dispute the account after the initial verification a notation is placed stating the consumer disagrees and disputes the information on the credit report. This can also alter the score.

Most loans will not be approved by a lender or will be kicked into manual underwriting if a consumer dispute notation is pending or unresolved on credit. Lenders are very aware of how these statements can change scores and most have rigid restrictions about what they will accept when approving financing. Most mortgage professionals are aware that a consumer dispute notation can inhibit their ability to get a loan closed but don't really know why.

Lenders want to price loans correctly with the level of risk the borrower reflects. An accurate score prior to pricing and extending financing is their primary concern which is why removing and/or resolving consumer dispute notations on accounts prior to getting a loan is so important.

A high quality credit repair company will explain this to loan officers when they have completed changes to an individuals credit and will remove any dispute notations before giving the applicant approval to begin the mortgage process. Unfortunately, there are many dispute factory type credit repair companies out there and even consumers that randomly dispute information with no strategy or foresight into how these dispute notations will impact the loan application. Mortgage professionals need to make sure the lender will approve financing if they plan on submitting an application with these open statements on credit.  If a loan officer pulls a credit profile and sees consumer dispute notations they should make the applicant aware of the need to have these notations removed or resolved.  In many cases it is quite difficult and confusing for the layman to address these issues on credit.  

Feel free to call us at 877-292-0656 with any credit questions or feedback! 

     

Making sure credit is analyzed with future financial goals in mind is a MUST before taking an action that can foil those plans and limit a consumers options for a better quality financial life.     

WHY ISN'T MY FICO SCORE AN 850 WHEN I HAVE MILLIONS IN THE BANK AND PAID MANY LARGE LOANS IN FULL?

How many times over the past twenty five years have I been asked this question by frustrated individuals who feel like a failure due to a FICO score lower than a 780?  The answer is hundreds!

Most people are very confused by the way credit scores work and how they represent who we are financially. Credit scores are an indicator of how we pay back and manage debt.  Having a lot of money does not mean a lender can automatically assume the borrower will pay back a loan.  Some very wealthy individuals default on debts and ignore making timely payments.  The only way a lender can really make an educated guess is by seeing how an individual manages current open and active accounts as well as past credit.  By looking at the history plus what management skills a consumer is using now can allow a lender to get a snapshot view of risk without visiting the borrowers hometown and speaking with all of his friends, business associates, and local creditors. This is a much more practical alternative than the old method before scores were created of visiting the borrowers hometown and speaking with all of his friends, business associates, and local creditors.  

One factor that could weigh heavily on a borrower's credit score is a lack of open and active current credit.  For example, if you have paid off two thirty year mortgages three years ago, as well as no credit card use in the past two years, you may find you don't even have a credit score.  Having open and active credit shows the lender you are currently in the credit game and that your skills are sharp.  What happened in the past won't help you if you have no active open credit.  This means you MUST use the credit cards you have at least a few months out of each year or you may lose your score.  Other effects of this example could be point reductions for inactivity and even creditors closing a card due to lack of use.  Unfortunately, what you have done in the past won't help you if there is no current active use of credit.   As long as you have primary open credit that is active showing on your credit reports, the score will give you extra points for the old closed credit that is still reported on your profile. 

A good well rounded credit portfolio is also a great asset to scores.  Without a variety of credit including installment, revolving, and mortgages, a score may wind up being lower than its potential.  Having credit cards, car loans, student loans, and mortgages makes a consumer more attractive because it shows an ability to manage many kinds of credit at once.  If all these accounts have a good payment history and are seasoned (older accounts) it tells a lender that you can juggle credit well.  Having the ability to juggle credit gracefully makes you a more reliable borrower.

There are many consumers that feel without the highest score they are a failure; which is far from the truth.  The FICO score ranges from a 300-850.  Anything above a 740 is considered excellent.  Having an 820 FICO score is as common as winning multi-millions in the lottery.  If a consumer has an 820 credit score they should have a party instead of crying over the 30 points missing from the top of the range.  Even a 780 is an amazing score and since credit is always changing due to balance increases/reductions, opening/closing credit, and inactivity of credit, it is very hard to keep scores at a set number.  To have the highest credit scores, a consumer should have low balances on revolving credit, old average age of credit, a good variety of credit that is open and active, and great payment history.

Call us with any questions about your credit challenges at 877-292-0656 or visit us at www.precisioncreditrestoration.com!

Making sure credit is analyzed with future financial goals in mind is a MUST before taking an action that can foil those plans and limit a consumers options for a better quality financial life.

Make Precision Your Decision!