Today I want to talk about being prepared financially with your credit report. Here is a picture of my first home back in 1973 or 1974. We bought the house in 1970 one year after we got married. Mark worked at a bank part time and went to the University of Utah full-time. He also taught classes once a week at night. Back then there were limited school grants, student loans….I still do not know how we made it financially, but we did….you have to look back and laugh……we were poor…..no doubt about it. But we were happy! We paid $18,500.00 for this home…and the interest rate was 7.75%, of course, we were only making $280.00 a month! LOL! Yes, the picture is blurry but consider photography back then with our Brownie Camera.
Some of you may know I did mortgage loans for over fifteen years and I owned my own mortgage company during that time.
Before that, I was in the private banking department of a large bank for years and did commercial loans, boat loans, car loans, two Harley Davidson loans (I had to throw that in…LOL! That was so fun-yes I have been on one!), farming equipment loans…the list goes on and on. In other words, I know a few things about credit.
When I did mortgage loans there were some things I tried to tell my clients to keep or improve their credit.
1. Do not be tempted to open those retail store charge cards just because you get 10-20% off. Your credit score will go down and it looks like you are applying for credit all over town. It is not worth the percent you will save. Please don’t rationalize…” but I pay it off when I get the statement”….STOP! Do not open them.
2. Everyone needs at least ONE credit card just to rent a car, pay for a hotel, order things online. Here is the deal…..please check with your credit union or bank, but typically if you use your credit card rather than your debit card and you have an error on your statement in most states it must be reversed within so many days. Credit cards…..so many days. Debit cards so many days….. Check with your bank or credit union. You need to know the laws/rules. BUT, you are also responsible for reporting the mistake on your statement or lost card within a certain time period. Here is a link that you might find beneficial.
3. When you are thinking about buying a car, truck, motorhome, boat or whatever, and you do not have the cash to purchase it outright….do not give your personal information to the dealerships until you decide you are buying the car from that dealership. Here’s the deal…..if you do it is an “inquiry”….okay, now the three credit bureaus have added that inquiry to their database. The dealerships will tell you differently….remember this: They want to SELL you that item. Credit inquiries within 90 days do hurt your credit.
4. The same goes for buying a house. Decide who you feel comfortable with as a loan officer and then give your personal information. Most reputable realtors have a favorite and honest loan officer you can use. If you apply online with ten different loan companies….your credit score will go down. Credit report agencies do not have a brain. They are a computer based reporting agency. They report what is generated from the different dealerships, retail stores, banks, credit unions, etc.
5. If you know you have a collection…pay it. These pull your scores down big time. Or try and make arrangements to pay it down. Start with the smallest one to pay off and move onto the next one.
6. If you know you have a judgment…pay it. These also pull your scores down big time. Or try and make arrangements to pay it. Start with the smallest one to pay off and move onto the next one.
7. If bankruptcy is your only option…..do not think it is a piece of cake. For your reference: Bankruptcy Chapter 7-means I cannot pay any of my debt to you. Bankruptcy Chapter 13-means I will make payments to you. Bankruptcy Chapter 11-means it is a business bankruptcy. Here is the deal….you usually have to pay a fee to even file for bankruptcy. The lawyers or whoever you are working with will send you a stack of papers to fill out. You have to declare all monies, assets, etc. Yep, even the valuable vase your Aunt Alice gave you they might take it to sell it……just saying.
8. If you have had credit issues in the past….we all know how hard this economy has been, people out of work, hours cut, etc., just remember there is hope. I know people who have lost homes to foreclosures and short sales. Yes, it typically takes three years to be able to buy another home after that happens. Okay….perfect, that gives you three years to clean up your credit.
9. I don’t believe in monitoring my credit…..but that’s me. I will not pay a fee to find out what my credit score is. Here is the deal, you are entitled by law to one free credit report a year from https://www.annualcreditreport.com/cra/index.jsp This is the website that was recommended when I took my classes to renew my National Mortgage and Utah Law Mortgage licenses.
10. One way to help improve your credit score if you have had some delinquent payments, etc., go check with your local bank or credit union and see if you can get a secured $500.00 credit card. This means you put up $500.00 to get the card as security. You can charge the card but typically need to pay back the entire balance monthly. Every company has their own rules. This way the credit reporting agencies can see you are “borrowing” but you are also “paying” it back on a time.
11. Please don’t close OLD credit accounts you might use. It looks awesome to the credit agencies if you have credit available but do not use it. I would close all other small accounts…but only if you are not about to buy a house. Wait to close any accounts until after the house closes. One tidbit too….if you have a mortgage loan your credit score goes up if you pay on time, of course!
I just read on Yahoo that some woman who tried for a few years to get some credit issue resolved that was incorrect….two agencies fixed it. The other did not…she did win a LARGE lawsuit. If you contact the agencies….keep a file and send the letters registered mail. We want to know they received them. Signatures required is even better!
Please don’t be discouraged….there is hope to improve your credit scores. I know, because I have helped thousands of people.