Why Credit Scores Are Different

Yes, there are MANY different credit scores out there.  There are credit scores consumers can pull themselves through credit monitoring, mortgage scores, auto scores, and many more.

There are actually over 16 different credit "scorecards" that exist today. Each of these scorecards will reflect different credit scores. These scorecards are designed to help particular industries better gauge credit risk.

The mortgage industry for example is more concerned with a consumers past mortgage history than anything else. So they weight home loan history heavier into the total score calculation than other accounts.

So a consumer’s credit monitoring score might be 660. But then when they apply for a mortgage, their score might be much lower due to some past negative mortgage accounts on the report.  Their mortgage score might even be higher than their consumer score, if they have past positive mortgage accounts.

A credit score that a consumer pulls themselves will not be the same as their mortgage score.  Their mortgage score won’t be the same as their auto score that car dealers pull either, because the auto score weighs past auto history heavier into the score makeup versus consumer scores. 

These different credit scorecards are designed to help specific industries better determine risk.  Due to there being so many industries that offer credit, there are also just as many credit scores available. 

Plus, different scores are offered by different companies creating even more credit scores. FICO is the biggest provider of consumer credit scores. But now even the credit bureaus themselves are in the credit scoring game, providing their Vantage score.

A Vantage score has scores as high as 990, while a FICO score can only be as high as 850.  So even though a 700 FICO score reflects good consumer credit, a 700 Vantage score reflects below average personal credit.

One thing is for sure; credit scores WILL be different based on who pulls the score and where the score is pulled through.

Still good credit is good credit. And fundamentally any consumer who pays their bills on time and has a good long-standing credit history, including a lot of different accounts, will have a good credit score.

Please feel free to contact Precision Credit Restoration at 877-292-0656 for a free consultation and to answer any questions you may have concerning your credit status.  We are here to guide you to a brighter financial future. 

"Make Precision Your Decision"

Late Payments On Mortgages = A Recipe For Credit Destruction

When purchasing a property or looking to refinance an existing mortgage individuals may not realize how destructive one new mortgage late payment can be to achieving their current financial and personal goals. Even if the individual has a 720 plus Fico score it does not mean instant mortgage approval. Most lenders do not want to see late payments on an existing mortgage for 12 months prior to loan application. If recent late payments occur, individuals can find themselves in a frustrating position with nothing but a dead end or exorbitant interest rates in sight. 

For example:

Richard, a high powered executive earning a great income is looking to purchase a second home at the beach for his family. He has always had excellent credit and scores as well as a great history with his current mortgage. Recently his loan changed service providers and when he received a letter in the mail that looked like promotional junk, he shredded it before even opening it. Three weeks passed and as usual the payment was made to what he thought was his mortgage servicer and he assumed all was well. Of course the payment went out to the old service provider and by the time he learned of his mistake he already had a late payment updated on his credit profile, dropping his Fico score from an 840 to a 720.  Although his credit score was good the recent late payment caused a rejection for loan approval. His banker advised him that he would either have to wait for the late payment to age 12 months or call us for credit restoration.

Of course Richard, being the highly intelligent and responsible person that he is, immediately called the service provider to complain and demand they remove the late payment from his credit.  After hours of fighting and no resolution in sight he gave up and reached out to us for help. Conversing with the creditor for hours, as Richard did, could make our job much more difficult since we do not know what words and information was exchanged to the service provider. Just like any legal  

battle whatever is said can be used against you! It is always better to contact us prior to the client reaching out to the creditor. 

Another example:

Janet, a school teacher earning a nice salary, decided it was time to buy a condo of her own. She was working with a realtor friend looking for a property in a city close to Manhattan.  Finally she found her dream place after a few months and connected with a banker to start the process for loan approval. Her friend had asked her to buy her Fico scores at the MyFico site prior to searching for a property just to make sure she was in the best position for getting loan approval.  Her score came in at a 780 so both were confident of a graceful loan approval once the right property was found.  She contacted a banker who pulled her credit scores to find they were a 650.  After deeper evaluation it was revealed that Janet had co-signed a mortgage to help her brother 7 years ago.  He had a landscaping business and did not show a majority of his income.  Since he could not be approved for the loan on his own she decided it would only be right to help him out. However, unbeknownst to her, her brother had been having problems paying his mortgage and decided to try to short sale his property. He was told by a friend that if he was late on his mortgage he would have a better chance of getting the bank to approve the sale. He had been late for the past three months.  After this information was revealed Janet learned not only would she be rejected for the loan and purchase of the Condo due to a drop in credit score and a recent 90 day late on a mortgage, but her income would no longer qualify for loan approval. Since the bank viewed the co-signed loan as her debt it diminished her ability to qualify for the amount of mortgage she would need to buy the condo she wanted. Her income was not enough for the lender to justify her ability to pay both mortgages.

There are many situations where consumers wind up with mortgage late payments including, tax increases (when taxes are paid by a bank and included in monthly mortgage payment), divorce issues, payer out of the country or in the hospital, wrong checking account number updated in auto pay, and more. 

Here are Fico disclosed score reduction predictions for mortgage lates:    
     

After a 30 day late payment:  

720 Fico score could drop to a 630-650

780 Fico score could drop to a 670-690

After a 90 day late payment:  

720 Fico score would drop to a 610-630

780 Fico score would drop to a 650-670

When comparing 90 day lates on a mortgage with what happens to scores after a foreclosure the 720 drops to a 570-590 and a 780 score drops to a 620-640.  

The difference between the damage a 90 day late on a mortgage payment and a foreclosure deliver to a 780 Fico score is minimal!  This just reflects how damaging a 90 day late payment on a mortgage is to credit scores.

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

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!