August 8, 2012

How to Increase Your Credit Score

How to Pump Up Your Credit Score

We’ve all watched as a majority of banks have tightened up approving home mortgages to people with a FICO credit score of 620 and a 10 percent down payment than they were in 2006, according to the report. Lenders are also less likely to do so even for those with a score of 720.
For those with a credit score of 720 or higher can expect a rate of 3.70 percent on a 30-year, while someone with a score of 620 to 639 can expect a 5.07 percent rate or an extra $80 per monthly payment for every $100,000 they finance.
Let’s face it, if you don’t have good credit, you’re not going to get that crazy low rate. But there are tactics that consumers could use to raise their scores.

1. Get a credit card if you don't have one

Don't fall for the myth that you have to carry a balance to have good scores. You don't, and you shouldn't. But having and using a credit card or two can really build your scores
If you can't qualify for a regular credit card, consider a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Look for a card that reports to all three credit bureaus.

2. Add an installment loan to the mix

You'll get the fastest improvement in your scores if you show you're responsible with both major kinds of credit: revolving (credit cards) and installment (personal loans, auto, mortgages and student loans).
If you don't already have an installment loan on your credit reports, consider adding a small personal loan that you can pay back over time. Again, you'll want the loan to be reported to all three bureaus, and you'll probably get the best deal from a community bank or credit union.

3. Pay down your credit cards

Paying off your installment loans (mortgage, auto, student, etc.) can help your scores but typically not as dramatically as paying down -- or paying off -- revolving accounts such as credit cards.
Lenders like to see a big gap between the amount of credit you're using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better.
Though most debt gurus recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits.

4. Use your cards lightly

Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. What's typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements.
You often can increase your scores by limiting your charges to 30% or less of a card's limit; 10% is even better. If you're having trouble keeping track, you can set up email or text alerts with your credit card companies to let you know when you're approaching a limit you've set. If you regularly use more than half your limit on a card, consider using other cards to ease the load or try making a payment before the statement closing date to reduce the balance that's reported to the bureaus. Just be sure to make a second payment between the closing date and the due date, so you don't get reported as late

5. Check your limits

Your scores might be artificially depressed if your lender is showing a lower limit than you actually have. Most credit card issuers will quickly update this information if you ask.
If your issuer makes it a policy not to report consumers' limits, however -- as is sometimes the case with "no preset spending limit" cards -- the bureaus may use your highest balance as a proxy for your credit limit.
You may see the problem here: If you consistently charge the same amount each month -- say, $2,000 to $2,500 -- it may look to the credit-scoring formula like you're regularly maxing out that card.
You could go on a wild spending spree to raise the high balance reported to the credit bureaus, but a more sober solution would simply be to pay your balance down or off before your statement period closes.

6. Dust off an old card

The older your credit history, the better. But if you stop using your oldest cards, the issuers may decide to close the accounts.. The accounts may still appear, but they won't be given as much weight in the credit-scoring formula as your active accounts.
So you might want to charge a recurring bill to one of those little-used accounts or take them out for dinner and a movie occasionally -- always, of course, paying off the balance in full.

7. Get some goodwill

If you've been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a "goodwill adjustment" improve the better your record with the company (and the better your credit in general). But it can't hurt to ask.
A longer-term solution for more-troubled accounts is to ask that they be "re-aged." If the account is still open, the lender might erase previous delinquencies if you make a series of 12 or so on-time payments.

8. Dispute old negatives

The older and smaller a collection account, the more likely the collection agency won't bother to verify it when the credit bureau investigates your dispute.
Some consumers also have had luck disputing old items with a lender that has merged with another company, which can leave lender records a real mess.

9. Blitz significant errors

Your credit scores are calculated based on the information in your credit reports, so certain errors there can really cost you. But not everything that's reported in your files matters to your scores.
Here's the stuff that's usually worth the effort of correcting with the bureaus:
  • Late payments, charge-offs, collections or other negative items that aren't yours.
  • Credit limits reported as lower than they actually are.
  • Accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed" if you paid on time and in full.
  • Accounts that are still listed as unpaid that were included in a bankruptcy.
  • Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your reports.

Closing an account can't help your scores and may hurt them. If your goal is boosting your scores, leave these alone. Once an account has been closed, though, it doesn't matter to the scoring formulas who did it -- you or the lender. If you messed up the account, it will be obvious from the late payments and other derogatory information included in the file.

Start by obtaining your three credit reports (available free once a year at, or call 1-877-322-8228), and study them carefully for errors or omissions. If you think your score labels you as a higher risk, signing up for a first-time homeowners class through Posh Realty.

If you have any questions, please call me

9am - 7pm, 7 days

Dante "The Realtor" Walker - Posh Realty
(323) 642-7674. I'm here to help you!

What is a Short Sale and How do I Qualify?

A short sale is a real estate transaction in which the seller owes more on the property than its current market value. If the homeowner is unwilling or unable to pay the sale costs and liens encumbering the property he/she can hire a trusted real estate professional like Dante “The Realtor” with Posh Realty to market and sell the property as a short sale. This requires approval from the lien holder(s) and sometimes third party investors.
Would I qualify for a Short Sale?
There are 2 main qualifications for a good Short Sale candidate:
  1. A short sale candidate is a homeowner who has a financial hardship. This could be due to sudden change in monthly household income, loss of job, illness, divorce, and more.
  2. A short sale candidate also has negative equity in their home.
How long does a short sale take?
Every short sale is different. Once a buyer and seller enter into a contract it’s sent to the seller’s lien holder(s) for approval. For this point it can take anywhere from 30 days to six months depending on several factors including persistence of the negotiator, number of lien holders and private investors involved and timeliness of seller to submit updated documentation.
As the seller am I required to pay the Realtor commissions?
Commissions are generally paid by the bank. Clarify this with your agent up front so you are not taken off guard at closing. Some agents will team up with a “short sale negotiator” and charge an up front non-refundable fee. Know your total out of pocket expenses prior to listing your home as a short sale.
Are there tax ramifications to a Short Sale?
Depending on your unique situation as a seller there may be tax ramifications. We are not qualified to give tax advice but we highly recommend you discuss this with your accountant or CPA before short selling your property.
Are there credit consequences to a Short Sale?
If you’re behind on your mortgage payment(s) your bank(s) have the right to report this to the credit bureaus. After going through a short sale or foreclosure most sellers have multiple late payments showing on their credit report. When this occurs it does have a direct affect on your credit.
Can the bank place a judgment against me for the difference between what I owe and what the home sells for?
What you should know is that California is currently an “anti-deficiency” state which under certain circumstances prohibits lenders from suing a seller from losses on their home. To see these circumstances you can contact Dante “The Realtor” and he will discuss this in further detail with you.

I’m behind on my payments. How long until the bank forecloses on my home?
Most notes give the bank the right to file the foreclosure notice as soon as you are 30 days behind on your mortgage. However a new law known as the “Homeowners Bill of Rights,” prohibits lenders from seizing a home while considering homeowner requests for alternatives to foreclosure. It also lets homeowners take legal action to stop foreclosures and seek monetary damages if a lender violates state law. 
In some cases there may be help available by way of the new stimulus plan. To see if you’re eligible check out the government site Making Your Home Affordable.