by Arlene Baxter
Today our Berkeley Association of Realtors auditorium was packed to capacity with Realtors wanting to get the latest information on the status of loan availability and appraisal conditions in this changing market. Our speakers, one representative each from the mortgage and appraisal industries, confirmed what we’d been hearing anecdotally from our colleagues. Loans were super abundant a year ago, with everyone knowing someone moonlighting as a loan broker who could get you “such a deal!” Last summer came the implosion of sub-prime lending and the virtual disappearance of jumbo loan products, those loans larger than $417K. Fast forward to our current state. The pendulum has swung so far that now folks with a fully documented loan application may have great difficulty getting financing if they have less than 20% down, gorgeous credit scores, and substantial assets. Buyers who can stay within the limit of a $417K loan can still get very attractive rates, today at the 5.5% level. But buyers who need to borrow amounts up to the new “super-conforming” limit of $729,750 need to be prepared for much stiffer requirements (see FHA and Freddie Mac Daddy from March 6th, below).
One of the elements of loan approval that has been mostly in the background up until now is the appraisal process. In our area we have for more than a decade been able to assume that homes would appraise for their contract value, except in the rarest of circumstances. If a property had multiple offers, as so many did, that was a strong argument in determining that market forces were setting value, and that we were in an area of increasing values. Lenders allowed appraisers to use closed sales back as far as six months, and there was reasonable flexibility to use properties that shared a similar characteristic to the subject property, even if they weren’t in the same neighborhood.
The job of the appraiser has changed dramatically over the past few months. Marian Huntoon, the owner of Real Valuation in Berkeley, spoke to our Association today about the intensity of scrutiny that appraisers must now face. Lenders want to see properties used as comparables that sold within three months or less, and they insist on having both an active and a pending sale in the same neighborhood. Appraisers are now routinely making significant adjustments to value in order to use “comparable” properties that are really not very comparable at all. Marian estimated that it takes appraisers anywhere from twice as long to four times as long as a year ago to complete an appraisal report that is acceptable to the lender. Appraisal reports are now routinely sent back to appraisers with the request that additional adjustments be made to reflect declining market conditions. That is really a loaded phrase. Lenders are now reviewing market conditions with an extremely broad brush, defining the direction of the market by county, not by city, nor by neighborhood. Those of us who are actively representing clients in this area know that we are still seeing multiple offers on many properties in the most desirable neighborhoods. We are back to seeing pre-emptive offers both in the modest and in the most expensive price ranges. So to have both Alameda and Contra Costa Counties defined as a whole as “declining market conditions” makes us all a bit crazy. Explain that to my buyer who lost out in fairly modest competition of only four offers. He still didn’t get the house he loved! And then there was the James house, receiving 17 offers last week after only one Sunday open house (see our March 14th entry below).
But it is also true that there are properties sitting for a few weeks before they sell, as opposed to selling according to a pre-established seven or ten-day schedule. And then, even in some of our most desirable neighborhoods, there are the short sales, trust sales and foreclosures. Those are topics for another day!
Tip for Home Sellers: Review carefully with your listing agent what the recent sales have been, closest to your home both in location and style. Try to step back and look at the data the way both buyers and appraisers will now be forced to look: at currently active homes, those recently pending, and the sales back only a very few months. Even if some buyers might be willing to offer a very high price, unless they have unusually high cash reserves to make up the difference, most buyers will need to have your home appraise very close to their offer, in order for the contract to close. Sellers should come to expect to see both financing and appraisal contingencies in the majority of offers, rather than assuming that buyers will waive those contingencies in order to have their offer accepted. The goal is not receiving and accepting a very high offer. The goal is, and really always has been, to close the escrow, and at an acceptable price.
Showing posts with label Credit Scores. Show all posts
Showing posts with label Credit Scores. Show all posts
Wednesday, March 26, 2008
Wednesday, September 12, 2007
Refinance or New Purchase: What You Need Today to Get a Good Loan
Mortgage rates have fallen with the expectation that the Federal Reserve will lower the federal funds rate when they meet on September 18th. This has increased the number of applicants looking to refinance and apply for new purchase loans. Rates are good, but qualifying for the best rate is more difficult during the current mortgage crunch. Banks are understandably a bit shell shocked from the recent melt-down in the sub-prime market. This will result in a pendulum effect and a conservative approach to evaluating borrowers. Proceeding with caution is a good thing. Let's learn from past mistakes and move forward. For those looking to take advantage of the good rates, here is what it takes to impress a lender:
- A Good FICO Score. Improve yours today with simple tips from our past post: Fix Your Credit...
- A Sizable Down Payment. Most loans now require at least 10 percent down, and lenders prefer 20 percent down.
- A Reputable Mortgage Broker. A good lender can increase your odds. Walking into your local bank branch may seem like an obvious approach to securing a home loan. However, your bank will have limited products available at any given time. Conversely, a good mortgage broker can shop your assets through multiple sources and help find the best program available for your situation. Reputation is important because you don't want to be disappointed if promises are not kept. Call your real estate agent for a reliable recommendation.
- Verifiable Income. Lenders would like to see at least two years of documented income. Self-employed individuals can still get financing, but rates may be higher.
- Patience. As banks take a more critical look at their borrowers, it may take longer for approval. Gather all the paperwork, and then realize that you may have to wait.
- A Backup Plan. Some well-qualified buyers were disappointed recently when their lender unexpectedly pulled the plug.
- A Dependable Real Estate Agent. A good real estate agent can help coordinate the pieces and keep your escrow on track.
Monday, August 6, 2007
The Sub-prime Fallout and Housing Affordability in the Bay Area
All of my usual optimism aside: For many months the sub-prime fallout did not seem to affect East Bay real estate, but now we are getting direct evidence that it is in fact taking some buyers out of the marketplace. A local lender, MPR Financial just sent a bulletin stating, "The secondary mortgage market has become extremely bearish on buying any new mortgages evidently due to the sub-prime fallout. If you have clients who are approaching the purchase of a home or new pre-approvals, please let them know that rates have risen dramatically and that lending guidelines have changed considerably." Although conforming loans are still available at reasonable rates, interest rates for jumbo loans are now exceeding 8%, and qualifying criteria has become more stringent. Self-employed and first-time buyers are often hardest hit as no-doc or low-doc loans and low-down payment loans become the first casualties of tightened lender restrictions.
Tip for Home Sellers: Make certain your real estate agent is equipped with the latest information on lending requirements and is assertive in asking the right questions of your perspective Buyer. Dated pre-approval letters may not meet the latest lender standards and no-doc, or low-doc loans may no longer be possible. A sizable down payment is now an even more valuable consideration in evaluating a purchase contract.
Tip for Home Buyers: Now more than ever, an experienced loan broker can help match your strengths to the best available loan program. Be wary of online lenders, especially if you do not have a local broker available to answer questions. A reliable real estate agent is also a must in the current climate. In a changing market reputable advisers are the best protection for your investment. See our post on fixing your credit score.
This will increase financing costs, mandate larger initial down payments for some buyers, and make monthly payments on some loans more expensive. Subsequently, the cost of home ownership has increased in our area. The full extent or length of this trend is unknown. Our housing inventory is still limited by our geographical boundaries, so how this will effect home prices remains to be seen.
Tip for Home Sellers: Make certain your real estate agent is equipped with the latest information on lending requirements and is assertive in asking the right questions of your perspective Buyer. Dated pre-approval letters may not meet the latest lender standards and no-doc, or low-doc loans may no longer be possible. A sizable down payment is now an even more valuable consideration in evaluating a purchase contract.
Tip for Home Buyers: Now more than ever, an experienced loan broker can help match your strengths to the best available loan program. Be wary of online lenders, especially if you do not have a local broker available to answer questions. A reliable real estate agent is also a must in the current climate. In a changing market reputable advisers are the best protection for your investment. See our post on fixing your credit score.
Sunday, June 3, 2007
Fix Your Credit, Get a Better Loan!
Berkeley Hills Realty
News You Can Use
Summer 2007 Issue
Giving Credit Where It’s Due
How to Improve Your FICO Score
By William Rodarmor
Anyone who has considered buying a home recently has heard the term “FICO.” It’s an acronym, and short for Fair Isaac Corporation. That company develops the software used by the three major credit bureaus to calculate their financial data on consumers. The bureaus use different names for the resulting numbers, but “FICO score” has become a universal shorthand way to describe a person's creditworthiness when they apply for a mortgage. (FICO scores range from 300 to 850. By law, each bureau must give consumers one free credit report every year.)
Most loan brokers find FICO scores convenient, some think them overly rigid. But love them or hate them, credit scores are here to stay. They make a big difference in how much borrowers pay for loans, so it’s worth finding out what factors affect your score and how to make them work to your advantage.
“FICO scores are huge now,” says Robert Jackson, an East Bay loan broker with BayCal Financial. “The credit score is the most important item that banks look at nowadays. They also look at your current amount of debt, job history, income, amount of savings, and how much down payment you are making. But the FICO score has become the real predictor of how you're going to pay your mortgage back.”
Paul Riccardi, president of MPR Financial in Albany, agrees. “Lenders now are very credit-score driven,” he says. “Income and assets are taken into account, but credit scores have become a sizable portion of the way a person's credit worthiness is evaluated.”
“In the old days, the numbers that mattered were your age and weight,” says Hazel Valera, a credit consultant in San Jose. “Today it’s your FICO score.” Valera claims that she once even heard a woman say that if you're thinking of going out with a man, “first find out what his score is.”
A Short Course In Score
A bank’s decision to lend someone money is based on risk, and one way to evaluate that risk is to look at the person's history of paying other people back. That's reflected in credit scores. A borrower with a high score, documented income, and other favorable factors is a desirable customer to do business with. (Also, loans are often resold on the secondary mortgage market, so the better the overall package, the more salable it is.)
The picture is clearest at the low and high ends of the score range. With a score of 550, you pay through the nose. With a score of 820, you get the red carpet. The chart makes this painfully clear. On a fixed-rate 30-year $700,000 loan, someone with a 550 score will pay $2,601 more a month than someone with an 820 score, and pay $936,341 more in interest over the life of the loan.
“As a general benchmark, if your credit score is over 720, your eligibility is increased,” says Riccardi. “Also, you can increase your loan to value to 100 percent financing. If it goes over 740, in some cases you get pricing compensation; the lenders knock off a percentage of your loan fee because your score is so high. That’s a rarity, but they will do it on occasion.”
But what about more average borrowers who want to buy a house, can document their income, and have a FICO score between 620 and 680?
“A 680 credit score is right in the middle of the road,” says Sam Krueger, a residential loan consultant with First Residential Mortgage Consultants in Berkeley. “If you're able to document your income and are putting 20 percent down, you’re probably going to get a really good loan.”
“In general, a score of 680 or better will get you in the door to almost all loan programs,” says Lisa Wagner of KLA Mortgage in Berkeley. “The higher the score, the better the lender likes it.” At 720 or better, some lenders may give you a discount, says Wagner. “They might give something back on the points, for example. Depending on the size of the loan, that can represent a significant savings.”
How to Improve your Credit Score
FBut what if your score is around 620 or below? It takes work, but there are a number of things you can do to raise your score and the esteem in your banker's eyes. Be warned, though: It's hard to change your credit score in a short period of time. It usually takes six months to a year to show results.
“I would get in touch with a mortgage broker and have a loan application and credit report pulled so you work on any potential problems,” says Jackson. “In fact, it's a good idea to pull up your credit report at least once a year to make sure that everything is being reported correctly. There are serious errors on lots of them.”
“Credit reports are usually pretty clear as to where the problems are,” says Riccardi. “Late payments, collections that have gone unpaid, balances that are too high. Or maybe something happened in the past that hasn't fallen off the credit report yet. All of these can affect that score.”
That said, there are many ways to maintain a high score or improve a low one.
Have multiple lines of credit. The ideal number is four open lines of credit, says Jackson-a car loan, a mortgage, and two credit cards, for example. “Use these 'lines' actively, and pay them off on time every month,” he says. “That keeps your score high.” Store cards-whether from Nordstrom or The Good Guys-don't have the same weight. Stores just don't extend a lot of credit, even to good customers.
Low balances, high limits. Keep balances low and credit limits high. A balance of less than 50 percent-30 percent is even better-on a card with a $10,000 limit is helpful. To lower a high balance, spread the money owed among a number of accounts, so it’s not over 50 percent on any single card.
Guard your older credit accounts. Even if you feel you have too many credit cards, don’t close the ones you’ve had for a long time. “The payment history on an old account counts for 35 percent of your score,” says Valera. “That’s the largest portion of your score.” It’s best if the accounts were opened some years ago, and show a perfect payment record.
Make all payments on time, especially your mortgage. “It's crucial not to have late payments on current mortgages,” says Wagner. “Those will hurt you with the lender more than any other kind of late payment you can have.”
Beware of unpaid medical bills. “Medical bills are notorious for causing problems,” says Jackson. “People go to the doctor and think their insurance company has paid the bill. But when they apply for a mortgage, they discover they've had a collection pending for the last two years.” Valera agrees: “Your ambulance bill will go straight to collections even before it gets to your insurance carrier, so if there is a mistake, it ruins your credit. Even if you pay it, the collection stays on your credit report.”
Pay off past due accounts, but let sleeping dogs lie. “Paying off a really old debt can actually hurt you,” says Krueger. “If you have an account due on your credit report that is a four or five years old, it will often be worse to pay it now, because that makes it more recent.” Just wait, he says. “After seven years, things are supposed to drop out of the score.”
Avoid public liens and judgments. Don't get into a fight with the guys who screwed up your kitchen remodel. They might slap a mechanic's lien on your house, and it will linger on your credit report even after it’s been satisfied. Bankruptcies, public liens, and judgments can stay on your credit report for ten years.
When asking for a mortgage, don’t apply for new credit. There are two reasons for this. First, you are showing the lender a snapshot of your current finances, so don’t change the picture while it's being looked at. Second, applying for new credit generates inquiries on your credit report, and the more inquiries you have on your credit report the slower the bureaus become, says Valera. There are two types of inquiries, “soft” and “hard,” she explains. A “soft” inquiry is what happens when you ask for your credit report from AnnualCreditReport.com or directly from one of the bureaus. A “hard” inquiry occurs when you actually apply for a loan.
Take your name off marketing lists. People often wonder why applying for a mortgage seems to trigger a flurry of marketing solicitations. It’s because the credit bureaus sell your personal data to banks and mortgage companies. This can generate an onslaught unsolicited marketing material, and may even lower your credit score a bit. Valera urges her clients to sign up at OptOutPrescreen.com. “That takes your name and address off all the lists that the credit bureaus use to sell marketing data,” she says. “It will reduce your junk mail and all those offers for pretty 0% interest cards. I can't prove that going to OptOutPrescreen.com actually increases your score, but my clients gain 5 to 7 points every time they do it.”
Piggyback on someone else's established credit. “Here is a trick that can increase your score a lot, and it's especially useful for young people,” says Krueger. “Suppose you're a student in your twenties with a student loan and one credit card, and your mom or dad adds you to their credit card: Boom! You now have ten years of credit history. It's like magic.” The primary holder's card will appear on your credit report, he says, and the report will treat that account as if it's yours. That way, you benefit from the card's low balance and long payment history.
Watch out for the little things. Small errors in a credit report can have a large impact. One Albany couple recently came to see a local mortgage broker with a tale of woe. They said that Bank of America had issued them a credit card that they didn’t use, and had been mailing the statements to the wrong address. “They never used the card, so no payments were made for four or five months,” says the broker. “It dropped their credit score 120 points!” The broker contacted B of A to clear up the mistake, but without success. “The credit card division was a complete pain about it,” he says. “This was a simple little error that wasn't my clients' fault, yet it was quite a ding to their credit.”
Is FICO a Four-Letter Word?
Loan brokers know a lot about credit scores, but that doesn’t mean they like them. “I hate these scores,” says one broker. “They're arbitrary, and a lot of erroneous information appears on people’s credit reports. I’ve seen people with bad credit but high scores, and vice versa. You might be a good credit risk but have a poor score because of one stupid thing you did. But that's the way it is now, so you have to play by the rules.”
Hazel Valera studies those rules carefully, and says she uses them to her credit clients’ advantage. “One thing I like about FICO is that if you make a mistake, you can correct it in six months. Before FICO came along, if you had a bankruptcy, that was it. Nobody would talk to you for seven years!” Today, Valera claims she can help people get right out of bankruptcy and buy a house when they are gainfully employed again. “But they have to follow my plan, and work at it,” she says. “The worst thing you can do is to do nothing.”
Sam Krueger isn’t crazy about credit scores, but has learned to live with them. “In the early days, you could write letters about unfavorable items on a credit report and explain them away,” he says. “Some lenders still operate that way, but very few.” On balance, however, he says that credit scores work okay. “We could probably come up with a better system, but credit scores are like SAT scores. Ultimately, they reveal a lot of truth.”
William Rodarmor is a writer, editor, and French translator in Berkeley, California.
© 2007 by Berkeley Hills Realty
News You Can Use
Summer 2007 Issue
Giving Credit Where It’s Due
How to Improve Your FICO Score
By William Rodarmor
Anyone who has considered buying a home recently has heard the term “FICO.” It’s an acronym, and short for Fair Isaac Corporation. That company develops the software used by the three major credit bureaus to calculate their financial data on consumers. The bureaus use different names for the resulting numbers, but “FICO score” has become a universal shorthand way to describe a person's creditworthiness when they apply for a mortgage. (FICO scores range from 300 to 850. By law, each bureau must give consumers one free credit report every year.)
Most loan brokers find FICO scores convenient, some think them overly rigid. But love them or hate them, credit scores are here to stay. They make a big difference in how much borrowers pay for loans, so it’s worth finding out what factors affect your score and how to make them work to your advantage.
“FICO scores are huge now,” says Robert Jackson, an East Bay loan broker with BayCal Financial. “The credit score is the most important item that banks look at nowadays. They also look at your current amount of debt, job history, income, amount of savings, and how much down payment you are making. But the FICO score has become the real predictor of how you're going to pay your mortgage back.”
Paul Riccardi, president of MPR Financial in Albany, agrees. “Lenders now are very credit-score driven,” he says. “Income and assets are taken into account, but credit scores have become a sizable portion of the way a person's credit worthiness is evaluated.”
“In the old days, the numbers that mattered were your age and weight,” says Hazel Valera, a credit consultant in San Jose. “Today it’s your FICO score.” Valera claims that she once even heard a woman say that if you're thinking of going out with a man, “first find out what his score is.”
A Short Course In Score
A bank’s decision to lend someone money is based on risk, and one way to evaluate that risk is to look at the person's history of paying other people back. That's reflected in credit scores. A borrower with a high score, documented income, and other favorable factors is a desirable customer to do business with. (Also, loans are often resold on the secondary mortgage market, so the better the overall package, the more salable it is.)
The picture is clearest at the low and high ends of the score range. With a score of 550, you pay through the nose. With a score of 820, you get the red carpet. The chart makes this painfully clear. On a fixed-rate 30-year $700,000 loan, someone with a 550 score will pay $2,601 more a month than someone with an 820 score, and pay $936,341 more in interest over the life of the loan.
“As a general benchmark, if your credit score is over 720, your eligibility is increased,” says Riccardi. “Also, you can increase your loan to value to 100 percent financing. If it goes over 740, in some cases you get pricing compensation; the lenders knock off a percentage of your loan fee because your score is so high. That’s a rarity, but they will do it on occasion.”
But what about more average borrowers who want to buy a house, can document their income, and have a FICO score between 620 and 680?
“A 680 credit score is right in the middle of the road,” says Sam Krueger, a residential loan consultant with First Residential Mortgage Consultants in Berkeley. “If you're able to document your income and are putting 20 percent down, you’re probably going to get a really good loan.”
“In general, a score of 680 or better will get you in the door to almost all loan programs,” says Lisa Wagner of KLA Mortgage in Berkeley. “The higher the score, the better the lender likes it.” At 720 or better, some lenders may give you a discount, says Wagner. “They might give something back on the points, for example. Depending on the size of the loan, that can represent a significant savings.”
How to Improve your Credit Score
FBut what if your score is around 620 or below? It takes work, but there are a number of things you can do to raise your score and the esteem in your banker's eyes. Be warned, though: It's hard to change your credit score in a short period of time. It usually takes six months to a year to show results.
“I would get in touch with a mortgage broker and have a loan application and credit report pulled so you work on any potential problems,” says Jackson. “In fact, it's a good idea to pull up your credit report at least once a year to make sure that everything is being reported correctly. There are serious errors on lots of them.”
“Credit reports are usually pretty clear as to where the problems are,” says Riccardi. “Late payments, collections that have gone unpaid, balances that are too high. Or maybe something happened in the past that hasn't fallen off the credit report yet. All of these can affect that score.”
That said, there are many ways to maintain a high score or improve a low one.
Have multiple lines of credit. The ideal number is four open lines of credit, says Jackson-a car loan, a mortgage, and two credit cards, for example. “Use these 'lines' actively, and pay them off on time every month,” he says. “That keeps your score high.” Store cards-whether from Nordstrom or The Good Guys-don't have the same weight. Stores just don't extend a lot of credit, even to good customers.
Low balances, high limits. Keep balances low and credit limits high. A balance of less than 50 percent-30 percent is even better-on a card with a $10,000 limit is helpful. To lower a high balance, spread the money owed among a number of accounts, so it’s not over 50 percent on any single card.
Guard your older credit accounts. Even if you feel you have too many credit cards, don’t close the ones you’ve had for a long time. “The payment history on an old account counts for 35 percent of your score,” says Valera. “That’s the largest portion of your score.” It’s best if the accounts were opened some years ago, and show a perfect payment record.
Make all payments on time, especially your mortgage. “It's crucial not to have late payments on current mortgages,” says Wagner. “Those will hurt you with the lender more than any other kind of late payment you can have.”
Beware of unpaid medical bills. “Medical bills are notorious for causing problems,” says Jackson. “People go to the doctor and think their insurance company has paid the bill. But when they apply for a mortgage, they discover they've had a collection pending for the last two years.” Valera agrees: “Your ambulance bill will go straight to collections even before it gets to your insurance carrier, so if there is a mistake, it ruins your credit. Even if you pay it, the collection stays on your credit report.”
Pay off past due accounts, but let sleeping dogs lie. “Paying off a really old debt can actually hurt you,” says Krueger. “If you have an account due on your credit report that is a four or five years old, it will often be worse to pay it now, because that makes it more recent.” Just wait, he says. “After seven years, things are supposed to drop out of the score.”
Avoid public liens and judgments. Don't get into a fight with the guys who screwed up your kitchen remodel. They might slap a mechanic's lien on your house, and it will linger on your credit report even after it’s been satisfied. Bankruptcies, public liens, and judgments can stay on your credit report for ten years.
When asking for a mortgage, don’t apply for new credit. There are two reasons for this. First, you are showing the lender a snapshot of your current finances, so don’t change the picture while it's being looked at. Second, applying for new credit generates inquiries on your credit report, and the more inquiries you have on your credit report the slower the bureaus become, says Valera. There are two types of inquiries, “soft” and “hard,” she explains. A “soft” inquiry is what happens when you ask for your credit report from AnnualCreditReport.com or directly from one of the bureaus. A “hard” inquiry occurs when you actually apply for a loan.
Take your name off marketing lists. People often wonder why applying for a mortgage seems to trigger a flurry of marketing solicitations. It’s because the credit bureaus sell your personal data to banks and mortgage companies. This can generate an onslaught unsolicited marketing material, and may even lower your credit score a bit. Valera urges her clients to sign up at OptOutPrescreen.com. “That takes your name and address off all the lists that the credit bureaus use to sell marketing data,” she says. “It will reduce your junk mail and all those offers for pretty 0% interest cards. I can't prove that going to OptOutPrescreen.com actually increases your score, but my clients gain 5 to 7 points every time they do it.”
Piggyback on someone else's established credit. “Here is a trick that can increase your score a lot, and it's especially useful for young people,” says Krueger. “Suppose you're a student in your twenties with a student loan and one credit card, and your mom or dad adds you to their credit card: Boom! You now have ten years of credit history. It's like magic.” The primary holder's card will appear on your credit report, he says, and the report will treat that account as if it's yours. That way, you benefit from the card's low balance and long payment history.
Watch out for the little things. Small errors in a credit report can have a large impact. One Albany couple recently came to see a local mortgage broker with a tale of woe. They said that Bank of America had issued them a credit card that they didn’t use, and had been mailing the statements to the wrong address. “They never used the card, so no payments were made for four or five months,” says the broker. “It dropped their credit score 120 points!” The broker contacted B of A to clear up the mistake, but without success. “The credit card division was a complete pain about it,” he says. “This was a simple little error that wasn't my clients' fault, yet it was quite a ding to their credit.”
Is FICO a Four-Letter Word?
Loan brokers know a lot about credit scores, but that doesn’t mean they like them. “I hate these scores,” says one broker. “They're arbitrary, and a lot of erroneous information appears on people’s credit reports. I’ve seen people with bad credit but high scores, and vice versa. You might be a good credit risk but have a poor score because of one stupid thing you did. But that's the way it is now, so you have to play by the rules.”
Hazel Valera studies those rules carefully, and says she uses them to her credit clients’ advantage. “One thing I like about FICO is that if you make a mistake, you can correct it in six months. Before FICO came along, if you had a bankruptcy, that was it. Nobody would talk to you for seven years!” Today, Valera claims she can help people get right out of bankruptcy and buy a house when they are gainfully employed again. “But they have to follow my plan, and work at it,” she says. “The worst thing you can do is to do nothing.”
Sam Krueger isn’t crazy about credit scores, but has learned to live with them. “In the early days, you could write letters about unfavorable items on a credit report and explain them away,” he says. “Some lenders still operate that way, but very few.” On balance, however, he says that credit scores work okay. “We could probably come up with a better system, but credit scores are like SAT scores. Ultimately, they reveal a lot of truth.”
William Rodarmor is a writer, editor, and French translator in Berkeley, California.
© 2007 by Berkeley Hills Realty
Subscribe to:
Posts (Atom)