Ever wonder what would happen to your credit score if you had a 30 day late payment?  Or are you deep in debt and wondering what to expect to happen if your credit score if you file for bankruptcy? Or maybe you are thinking about doing debt settlement as a way to possibly try to avoid bankruptcy?

Up until recently, financial mistakes were somewhat of a mystery as to what impact they would have on your credit – but thanks to the folks at FICO, now you can have a pretty good idea what several common financial missteps can have on your credit score.

It appears as if the people at FICO are at least trying to be a little more transparent as to how FICO scores are calculated – which in my opinion is a good thing. Now people can have a good idea of exactly what kind of impact their decisions will have on their credit score rather than just “I have bad credit and I am not exactly sure why…”

According to FICO spokesman Craig Watts:

“I hope this information will help people to better understand FICO scores and the value for them of avoiding credit missteps. It illustrates key points such as the higher your score, the farther it can fall if you stumble. Getting and maintaining a good score isn’t complicated. We all just need to pay our bills on time, keep credit card balances low and take on new debt sparingly. “

Regardless of whether or not FICO releases more information about their scoring model – we know way more about it today than we did a month ago!

Other Interesting Posts

• IndyMac Halts Foreclosures
• HomePath Mortgage Loan: No Appraisal Required
• The VA IRRL Streamline Refinance Program: No Appraisal Required
• Loan Modification: “Once In A Lifetime Opportunity”

The FHA Streamline refinance was originally created by HUD to “make it easy” for people who currently had FHA loans to be able to take advantage of lower interest rates when they were available without having to completely re-qualify for a new loan.

Recently, many lenders now require credit scores of 620 if you want to do an FHA streamline refinance — many, but not all.

Here is an example of an email lenders get when a particular lender changes their credit policy:

FHA & VA Non-Credit Qualifying Streamline Refinance Transactions Credit Report Requirement

Effective for any loan that does not have a Conditional or Final Approval on or after June, 18, 2009

<XYZ Mortgage Lender> requires a credit report for all non-credit qualifying FHA streamline refinance transactions as well as all VA IRRRL transactions

The credit report must reflect the borrower(s) credit score and must have a mortgage rating for the subject property that reflects no more than 1 X 30 in the previous 12 months. A single in-file credit report, from one repository, with all credit reported, will be acceptable provided it contains a complete credit history for the borrower(s) as well as the required mortgage history information; if not then a tri-merged credit report will be required.  If you have a 495 prefix then you must have a 640 and reflects no more than 1X30.

In addition to the credit report provided by the broker or correspondent a separate mortgage rating will be pulled by our Quality Control Department to validate the mortgage history. <XYZ Mortgage Corporation> will obtain a single in-file report from CREDCO using the repository that reported the mortgage history on the original broker/correspondent credit report

Remember, when shopping for an Arizona FHA streamline refinance, right now, the rules are different from one lender to the next — so if you don’t get the answer you want… keep looking!

Related Posts

• Arizona FHA Streamline Refinance: No Appraisal Required
• Arizona FHA Streamline Refinance Requires 620 Credit Score
• FHA Streamline Refinance: Getting Tougher To Do
• Arizona FHA Refinance With No Appraisal Required

I have had more than one call recently from someone asking me a question similar to:

“Do I need a 620 credit score for the FHA streamline program?”

And I am happy to report that my answer a.) is accurate as of today and b.) is generally the answer they are looking for.



I don’t remember the last time that someone with a credit score of 740 called me and asked me “hey, do I need a 620 credit score…?” because the truth is that in my experience, the only people who care about whether or not a particular credit score is required are those people who have recently been told that they didn’t qualify.

The good news (for now) is that if you have recently been told that you need a 620 credit score to qualify for the FHA streamline program, your loan officer was probably right. What I mean by that is that many lenders are requiring that you do have a 620 credit score and your loan officer was probably working with those lenders. Which means that although he was right — you can still get a loan if you ask a different loan officer.

But to my knowledge…

As of today…

I have more than one lender who will allow you to participate in the FHA streamline program with no minimum credit score required.

And if it changes, I will be sure to keep everyone updated.

So if you have been told that the FHA streamline program has recently begun to require a minimum of 620 credit score – you were mis-informed. What is true though is that most lenders and investors have started requiring a minimum of a 620 credit score before they will lend you money.

And remember — it is the lenders/investors who lend you money, FHA only insures your loan.

Related Posts

• FHA Minimum Credit Score Now 620
• FHA Loans Now Require A 640 Credit Score
• FHA Loans and Credit Scores: What Role Does Your Credit Score Play?
• 640 Is The New 580

I hung up the phone with someone yesterday who asked me a few questions about FHA credit score requirements. The answers I gave to the questions she asked were just strange enough that I thought it might be helpful to share with others – because they may have these same questions.

Question: Does FHA require that people have minimum credit score requirements?

Answer: No, but investors do. And because investors all have different credit score requirements, you will find that they won’t lend you money unless you meet their minimum credit score requirements.

What has essentially happened over the last year or so is that there has become a “normal” credit score requirement by many investors of 620 – meaning your middle credit score must be 620 to be able to get the investor to lend you money that can be insured by FHA.

But not all lenders require a 620. Some require a 580. Some require a 500. Some have no credit score requirements at all.

It all varies by investor, and each loan officer generally works with many different investor, no matter what company they work with.

If you called me today, and asked me “if I work with you as my loan officer, what is the minimum credit score that I will need?” Here is the answer I would give today:

If you are refinancing your current FHA loan, I have an investor that doesn’t require a minimum credit score for the FHA streamline refinance.

If you are purchasing a house using an FHA loan, all of the investors that I work with currently require that you have at least a 620 middle credit score.

And of course, that all can change – as in maybe even 2 minutes after I hit “publish” on this post.

Related Posts

• FHA Minimum Credit Score Now 620
• FHA Loans Now Require A 640 Credit Score
• FHA Loans and Credit Scores: What Role Does Your Credit Score Play?
• 640 Is The New 580

“If you have bad credit, can you still get a mortgage?”

Generally speaking – no.

Or maybe I should say “not until you fix your credit”.

Fix your credit?

How does that work?

The truth is, I don’t really know (how is that for honesty?).  But I can say that we work with a small handful of credit repair companies who help people remove inaccurate information from their credit reports and have seen people have success with these companies.

The end result?

I see someone who has a poor enough credit score (below 580) that they can’t qualify for a mortgage loan going into one of these credit repair programs and someone who has a high enough credit score to qualify for a mortgage “graduating” from their programs.

Common Questions About Credit Repair Companies

Do credit repair programs cost money? Yes.

How much do credit repair programs cost? Each one is slightly different, but it seems to be less than $100/month in general.

Will they actually “fix” my credit? Yes – or at least that is what I have seen happen with clients that I have seen enroll in their programs.

How exactly do they “fix” my credit? I don’t know – but they will be happy to explain their process, I am sure.

Is credit repair a “scam”? Not the credit repair companies that I am familiar with – their clients enroll, pay a fee and generally graduate the program with higher (usually high enough to qualify for a mortgage) credit scores. That would seem to disqualify them as a “scam”.

Do you currently have bad credit? Now is the time to invest the time and money to fix your credit so that you can qualify for a mortgage while interest rates are low — and interest rates won’t stay low forever!

Oh, and Mr. Obvious just stuck his head in my office and asked me to remind everyone that the first step toward fixing your credit is to to keep paying your bills on time.

Related Posts

• All About Credit Scores (Part 3 of 3)
• All About Credit Scores (Part 2 of 3)
• All About Credit Scores (Part 1 of 3)

From time to time, I am asked questions about the FHA program or FHA loans by various people such as:

• “How long does it take to fund an FHA loan?’
• “What is an average FICO score for someone who gets an FHA loan?”
• “Is the Hope for Homeowners program real?”
• “How come I have never heard of the 203k streamline program?”

I am sure there are many places to get the answers to the above questions, but one quick place to find these answers is on HUD’s website under the FHA Outlook section – the answers below came from their most recent, early-November FHA Outlook report:

What is an average FICO score for someone who gets an FHA loan?

For people who were buying a home with an FHA loan, the average FICO score for the first 2 weeks in November was 693.

For people who were refinancing a home with an FHA loan, the average FICO score for the first 2 weeks in November was 662.

How long does it take to fund an FHA loan?

For the first 2 weeks in November, it took an average of about 5.5 weeks from application to closing.

How come I have never heard of the 203k streamline program?

Probably because it is not done very often.  There were 628 of them done in the first 2 weeks of November.

Is the Hope for Homeowners program “real”?

In the first 2 weeks of November, for the 40k or so refinance transactions that were done, 69 were Hope-for-Homeowners cases.  40,000 FHA refinances… 69 Hope for Homeowners.  Does that answer your question?

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• Basic Steps to Acquiring a Government-backed FHA loan
• The Cost of an FHA Loan
• Arizona FHA Loans – As Popular As Ever
• Acceptable Sources of Funds For Closing Costs / Down Payment

In our final installment of All About Credit Scores, I thought I would compile some of the Frequently Asked Questions that I have heard in the recent past (that I could remember at least!).

“Will paying off a collection account remove it from my credit report?”

No.  A paid collection account will remain on your credit report for seven years.

If I have a collection, should I pay off the collection agency or the original creditor?

Always pay the collection agency that is collecting for the original creditor.  Many times the original creditor will have sold your account to the collection agency.

How can I get accounts removed from my credit report that were awarded to my ex-spouse in the divorce decree?

A divorce decree does not supersede an original contract with a creditor.  You must contact each creditor individually and seek the legal binding release of your obligation.

I have no credit and I can’t get a finance company or credit card company to approve me — how can I start to establish credit?

One of the easiest ways to get credit if you have no credit is to apply for a credit card.   If you are turned down by a regular credit card, you can apply for a secured credit card.

How can I get inquiries removed from my credit report that I did not authorize?

You will need to contact the bureaus directly to dispute these inquiries.

Why do Experian, Equifax and Trans Union sometimes have different information?

Creditors voluntarily provide information to the credit bureaus and are not required to report to all three.  Some companies do not report to the bureaus at all, so it just depends on your creditors.

Do you have more questions about your credit report, credit scoring or anything else credit-related?  Let us know!

Related Posts

• If You Have Bad Credit, Can You Still Get A Mortgage?
• All About Credit Scores (Part 2 of 3)
• All About Credit Scores (Part 1 of 3)

In part 1 of our All About Credit Scores series, we covered a few simple ways to tip the scales in your favor when trying to maintain a good/great credit score.  Today we are going to cover the “secrets” behind credit score calculations.

Until recently, the secrets of credit score calculation have been very closely guarded — but we can now pretty closely estimate how your score is put together.

Payment History = 35%

Do you pay your credit on time?
Length of positive credit history
Severity and quantity of delinquencies

Amount Owed = 30%

Quantity of credit accounts — too many credit cards with balances can lower a score.

Length of Credit History = 15%

The longer the history, the better.
How long have your credit accounts been established?
How long has it been since you used certain accounts?

New Credit = 10%

Research shows that opening several credit accounts in a short period of time does not represent greater risk — especially for people who do not have a long established credit history.

Types of Credit In Use = 10%

2 installment loans
3 revolving accounts with balances
Balances on revolving debt below 30% of the high credit
No collection accounts
No public records
No foreclosures
No late payments

While the most important thing in credit scores is your overall score — what makes up that score is helpful to know.  For example, if you know that too many credit cards with balances can hurt your score — you may want to take steps to consolidate those cards into one account or pay them off if possible.

Many times, your mortgage professional will have access to something called a “what-if” simulator — which will allow them to easily explore how different actions may impact your credit score.  The simulator will allow you to experiment with actions — individually or simultaneously — from making payments to closing accounts, transferring balances and more.  It is helpful to predict results and to make informed decisions about what actions on your part could easily increase your credit score.

So if you haven’t heard of the “what-if” simulator and are working on refinancing or buying a home, make sure you bring it up with your loan officer — a boost in credit score could save you thousands of dollars in interest over the life of your loan!

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• If You Have Bad Credit, Can You Still Get A Mortgage?
• All About Credit Scores (Part 3 of 3)
• All About Credit Scores (Part 1 of 3)

Your credit score is a numerical representation of your statistical likelihood to repay credit that is extended to you.  Scores range from 350 to 850.  Your score is a “snapshot” of a specific moment and can change with new actions and the passage of time.

Some things that can help you tip the scales in your favor include:

• Paying all of your bills on time or early.  Even a 30 day late on a small credit card can have a significant negative impact on your scores.
• Don’t co-sign for someone else’s loan — their late payments are your late payments!
• Don’t close old revolving accounts no longer in use.
• Don’t open new accounts unless absolutely necessary (inquiries may or may not affect your score depending on the rest of your credit history).
• Report fraud immediately.  If you find yourself the victim of fraud, immediately contact the credit bureaus, your credit card companies, banks and the FTC.
• Monitor your credit.  Order a copy of your credit report once a year.
• If you are planning to refinance or buy a home, don’t make any purchases or run up the balances on your credit cards prior to the transaction.  They will be counted in your debt-to-income ratios.

In part 2, we will unveil the mystery of what makes up a credit score and the secret formulas behind credit score calculations. Special thanks to Advantage Credit for help with the content of this series.

Related Posts

• If You Have Bad Credit, Can You Still Get A Mortgage?
• All About Credit Scores (Part 3 of 3)
• All About Credit Scores (Part 2 of 3)

I was speaking with someone this week who had been the victim of identity theft — and I was again reminded what a personal and financial toll identity theft can have on its victims.  Here are a few simple ways that you can help protect yourself from being a victim of identity theft:

Monitor your credit report (at least) annually.
Recently, Rhonda Porter blogged about how you can have your credit monitored for free as a result of litigation — so it is now easier than ever to monitor your credit report on an ongoing basis and not just once-per-year.

Secure your mail.
Does your mailbox have a lock on it?  If not, you may want to get a lock or even set things up so that your mail is delivered to the post office directly.  Many times unsecure mailboxes are contributing to the problem.

Electronic keypad signatures.
When you sign your name on the electronic pad at the checkout register, add the date to your signature.

Safeguard your social security number.
Don’t carry your ss card with you (what happens when you lose your wallet?) and make sure that you know exactly what is happening with it when you give it out.

Destroy all bank/financial statements and solicitations.
Don’t just throw your old bank statements in the trash — shred them!  ATM receipts?  Shred them! Same thing goes for all of those pesky credit card offers — shred them!

Always review your bank/credit card statements.
Make sure that all of the charges listed are actually yours and if not, contact your credit card/bank right away.

Remove bar codes from magazines before throwing them away.
These bar codes tell volumes about you — don’t let them fall into the wrong hands.  Remove the bar code labels and shred them.   The magazine itself?  You can just put that in the trash (recycle trash bin is blue in Arizona!) because it doesn’t have any of your personal information other than the bar code label on the front.

Keep your medical insurance card safe.
Medical ID theft is the newest wave of identity theft.

If you pay your bills by check:
Make sure to put your work phone and address on your checks, not your personal home information.

Will following these steps mean that you can rest easy knowing that you are never going to be a victim of identity theft?  Of course not.  Even with doing all of these things, you still need to be on the lookout at all times and make sure that you protect who you are — or at least who the banks/reporting agencies/whoever else thinks you are.

Other Interesting Posts

• Buying A Home In Arizona Using an FHA Reverse Mortgage
• FHA Mortgages: Changes Coming?
• Chris Papaccio: Arizona Insurance Agent
• Buying A Home In Arizona: What Can You Afford?