Credit Score Effect On Refinancing
House Refinance Center
Breakdown of the FICO Scores
35% Payment History
30% Amounts Owed
15% Length of Credit History
10% New Credit
10% Types of Credit
Refinancing a house mortgage is not a simple task anymore. The loan process takes longer and
lenders are spending more time verifying documentation, especially FHA lenders.

Being with the same lender for ten years or more is no guarantee that the borrower will get the loan
approved. In the wake of the subprime meltdown and the housing crisis, borrowers can expect tighter
underwriting standards, and request for more documents.

Credit scores definitely matter. Borrowers with credit scores above 750 should have an easier  time
because their mortgages can be packaged and sold on the secondary market. A score below 700 is a be
around 1 percent of the loan amount.

Here are four basic areas to work on to improve your credit score.
1. Errors on your report. Get a copy of your report. Look for any errors. If you find any, contact the credit
reporting agencies and ask them to make the necessary corrections. Errors are common and can take
months to fix.

2. Debt-to-credit ratio.  Try not to max-out your credit cards every month. If your limit is $5,000 and you
consistently carry a balance of  $4,500, that is not good. Your ratio is 90% and you become a high risk.
Keep your balance around $1,000 or 20%.

3. Late payments. When a lender sees that you are late every month, that is a big problem. Accounts that
are 30 days late, become 60 days late and eventually go to collections. If it means making a minimum
payment to prevent an account from being "past due", do it. However, be aware that the next month you
have to pay extra to make the account current.

4. Old accounts. Leave your accounts open. If they have a zero balance that is not a big issue. If you close
the account and then try to re-open later, that could be a problem.

Not all lenders use credit scores. These are portfolio lenders. They are usually Savings & Loan
institutions. Borrowers would generally use portfolio lenders as lenders of "last resort".


National Distribution of FICO Scores
1%                 5%                8%                12%                16%               19%                28%                      11%
up to 499      500-549       550-599      600-649          650-699        700-749         750-799               800+
Changes To Free
Credit Reports
That Cost Money

We have all seen the advertisements for
"free credit to pay for them. Nothing is
free. The Federal Trade Commission is
doing something about this. Under the
new rules advertisements must have
clear disclosures. If there is a fee, the
advertisement must say there is a fee
upfront. There will no longer be
confusion with reports that are actually
free. You can get free, no strings
attached, no credit monitoring
reports at AnnualCreditReport.com
or call 877-322-8228.

The amended rule is effective April 2,
2010.
Finding a Credit Worthy Buyer To
Qualify For A Mortgage - Priceless

Interest rates are at record lows. There are millions
of houses to choose from. And house prices are
dropping week after week. So, why can't you find a
buyer for your house? The answer is simple.
One-third of Americans can't qualify for a mortgage
because their credit scores are too low.

According to Zillow, people with credit scores under
620 who requested a quote on a 30 year fixed rate
were unlikely to get a quote even with a
downpayment of 15 to 20 percent. This information
was from a study of over 2,500 loan quotes and
purchase requests during the first half of
September.

The good news for those of you with credit scores
720 and higher is that you will get the red carpet
treatment. You get a mortgage with great terms and
with the lowest rate.

Tighter credit was a response to the housing crisis.
Lenders are sticking to the new underwriting
guidelines and documenting all details of the loan
application.

Starting last summer, homebuyers looking to take
advantage of the FHA's 3.5% downpayment
mortgage, needed a credit score of 580 and better.
Are lenders taking the 580 score seriously? HUD is
telling lenders to follow the FHA guidelines or else.
In July more than 1,000 lenders were sanctioned for
running afoul of the guidelines. Some lenders were
kicked out while some were fined. Remaining
lenders are going the extra step to make sure that
every FHA requirement has been met.

If you are around 690 and would like to get to the
coveted 720, there are a few steps you can take.

>>Always pay on time.
>>Avoid carrying large balances.
>>Avoid too many inquiries on your report.
>>Monitor your credit.

Meanwhile, if you are trying to sell your house, you
might have to consider making some concessions.
How Important Is A High Credit Score?

How much emphasis do we put on a credit score? My friend JD's uncle had a FICO  
score of 810 about a year ago. Right now Uncle Joe is at 720 and sinking fast. All he
did was apply for a loan modification. And he was 3 days late once.

Uncle Joe hasn't changed much. He is still a reliable and honest individual, with good
values, and outstanding character. He did run into some financial troubles. But I'm
sure he will pull through.

We are in a housing and economic crisis. Homeowners who faced foreclosure, or
went through a short sale, came out with damaged credit. Some of these people were
good law abiding citizens. Paid their taxes. Paid their mortgages. Put their kids
through college. Will they ever get a "good" credit score again? The experts say it
could take as long as 7 years to rebuild your credit.

The lenders are waving the credit score flag in front of you and telling you that they
want a score of 750. That's crazy. After all the rough times we have been through we
need lenders to look at more than a score. We need lenders to examine our job
history and our payment history. Many of us had late payments, missed payments,
partial payments and settlements.

What percentage of the population has a score 750 and above? Who decides what
score is adequate? A score that is good to buy a car might not be good for a house.
For a house we might need 780 plus.

Credit experts say that you must use your credit cards to raise your score. In other
words, be in debt, pay the interest to the banks so that when you want a loan they will
lend you  money at a ridiculously high rate.
Denied A Mortgage 4
Times
Times are tough and credit is tight. In
defence of the banks, they are cleaning
house and revamping their lending
guidelines.

If you were denied a loan more than twice,
maybe you are not ready to buy a house.
Get your finances in shape, improve your
credit score, and a down payment, and try
again.

Under the Equal Credit Opportunity Act
your lender must provide you with written
reasons why the loan was denied.

The tighter lending policies are across all
product that the banks sell. If you are
applying for a HELOC or a refinance, you
will be faced with the same problems. In
most cases where a house is involved, the
steep drop in house values has led the
lenders to take a second look at loan
applications.

Remember, you can apply at different
financial institution for a loan, but do not
over apply. In other words do not apply to
four lenders in the span of four weeks.
Your credit score will take a beating.
Watch the slideshow.
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