Credit Report Scores -
Fallacies
about repairing your FICO Beacon rating.
Learn about free credit reports and fallacies on repair of
FICO Beacon scores online. Credit
report scores, FICO from Fair Isaac
Corporation and derogatory Beacon
ratings remain in a consumer's file for seven
years. Chapter 7 bankruptcies remain for 10 years. The time frame is from
the "last active" date. One of many misconceptions being circulated is the thought that repaying old collections and accounts that
were "charged off" will improve your chances of getting a home
loan pre-approval. The amazing thing
is, by paying off these old accounts like a good consumer, the "last active"
date changes from say, five years ago, to the payoff date, and the seven-year
clock starts all over again.
So, to add insult to injury, the report credit scores for FICO and Beacon are
adjusted by how recent the
derogatory accounts are. Please understand this, a recently "Paid Collection" account does
much
more damage to a FICO credit score report than a six-year-old "Charge Off"
It
seems cynical that honoring one's obligations can hurt one's
FICO / Beacon. Trying to repair a credit score
rating on reports can actually do damage.
Repairing your rating is a mater of time and doing the right things. Be careful not to
unintentionally do the just the opposite. Poor ratings won't stop you
from getting a home loan. You may have to pay a little higher than
market interest rates, but you
can still get a home loan even with interest only
payments. Sub-prime lenders extend bad
credit mortgages at fair rates.
You may find that you DO have to payoff an account.
A borrower in this circumstance has a couple of efficient means available to
them. If they have the cash to go ahead and pay off the old accounts,
they should first call the creditor reporting the collection account. It is
imperative that they speak with a manager that has
authority to negotiate final settlements with the debtor. Once this
manager is found, you
should start with an offer to settle at 70% or so of the
balance due. Make this offer on the strict condition that the account
be reported as simply "Paid", not "Paid Collection" or "Paid was 60
days late", etc.,
and the last active date remain unchanged. Make sure the you
receive this arrangement in writing before making any payment to them.
Order a Good Faith Estimate form to see
how much cash you'll need for a home purchase to see if you can afford it. If
necessary for qualifying, you may want to look at a sub prime
adjustable mortgage rate where the
lender approves loans with low ratings.
Remember that the older the account is, the easier it should be to come to terms on such a settlement. In
many instances you should just let the old accounts disappear with time.
One of the most common myths regarding repairing the consumer file is the
influence of inquiries or the number of reports pulled on a credit report's Beacon / FICO scores.
A few inquiries will NOT impede your efforts to repair your rating.
Even more influential is the way mortgage loan inquiries are handled.
First, they have no impact on for thirty days (the same
applies to auto loans). In addition, all home mortgage inquiries within a 14-day
/ two week period count only as a single inquiry to the bureaus. For the
reason that the final credit report score number is a
compilation
of all the borrower's available information, no one factor like a late payment
or a bankruptcy or foreclosure will be the sole cause of an unacceptable number.
You should be able to
purchase a home even if you have a poor
rating. Many direct lenders and
mortgage brokers specialize in sub-prime lending. You may not need to pay
off those old judgments or charge offs
to get a new home loan.
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