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Your credit maybe considered bad and causing a low score for a number of reasons. While the are numerous reasons for bad credit some of the more common ones are as follows. You have numerous credit cards that are maxed out or close to the credit limit, you have unpaid judgments or collection accounts, you have 30 day lates showing on your payment history. All of these examples can cause severe drops in your credit score.

One area people overlook that can negatively impact their credit report is failing to honor mobile phone contracts. Cell phone companies give away free phones to customers who sign on with their services for a specified period of time, usually one to two years. Terminating subscription to the phone service before the expiration and failing to reimburse the phone carrier for the cost of the free phone is considered breaking the contract. Cell phone companies would then report to the credit bureaus and cause a blemish on the credit history. Such blemishes are not serious, but they nonetheless lower credit scores.

Credit scores generally range from about 350 to 850.

• 800+ = great credit
• 700-799 = good credit
• 600-699 = average credit
• 500-599 = bad credit
• under 500 = hard to get a loan at all

Your credit can be bad for a variety of reasons: Late payments High Account Balances Bankruptcy Collections Charge offs To minimize negative on your factors you will need to pay down balances, make payments on time, dispute incorrect information, and let the passing of time lessen the impact of past bad credit.

To many inquires at one time can affect your credit score.

If you credit score is low because of a high balance on a credit card transfer some of the balance to another card. Try not to open a new card because to do this can also reduce your score.

One reason why your credit may be bad is because of erroneous information reported on your credit report. This can happen to anyone and is actually quite common. This is one reason why you need to check your credit report out at least once per every 12 months. By checking you credit report for free you can keep an eye on your credit and make sure that you take care of any erroneous information when it happens, not when you are trying to apply for a loan and it comes as a surprise to everyone. Utilize your one free annual credit report each year to take a look over your credit to make sure everything looks well. There are many reasons as to why credit report errors can happen so make sure that if errors do happen to you that you rectify the situation immediately.

Maintaining high balances on your credit cards and other revolving debt negatively impacts your credit score. Paying down credit cards balances below the 70%, 50%, and 30% thresholds is a quick way to boost your credit score.

Paying down your credit card balances to around 30% will help your score. If you can, try to keep the balance at that level at all times. If you need to raise your score quickly, and don’t have the money to pay down your balances, you may request that your creditors increase your credit limit. This will in turn lower your balance in comparison to the limit. Only use this technique if you are responsible with your credit. Once your limit is increased, it may be tempting to go on a shopping spree. Know that if you do this, you will be in a much worse situation than when you started. Not only will you have more debt, but you will increase your ratio of balance to limit.

There are several ways to increase your credit. However the fundamental principle is the bills must be paid on time. This doesn’t mean by the due date. For the sake of your credit a payment must NEVER be more then 30 days late. If you are acquiring 30 day lates on your credit then your credit standing will deteriorate quickly. Judgments also hurt your credit even if you pay them.

It is also important to note that a credit score is a snapshot. Although it shows your payment history, length of credit, etc. having inaccurate (negative) information removed from your credit bureau report will immediately reflect an increase in your score.

If you do decide to pay off some of your credit cards, be sure to leave the cards open. The credit bureaus look favorably upon accounts that have been open for a substantial period of time, especially if they are showing a zero balance.

Remember that a credit score amounts to a prediction of how likely it will be that you go 60 days late or more on your mortgage in the next two years. One thing that will really lower this score is if you carry high balances on revolving debt and then start making a few of the payments late. This is the pattern of a consumer who is close to getting in trouble with debt.

Things that may go into a collection or judgment that will hurt you credit are; unpaid medical payments, unpaid utility payments, and unpaid cell phones or cable payments.

Different lenders have different mortgage application requirements. The following information is generally required: Social Security Number Employment History (for 2 years) Pay stubs and W2’s, Checking, Savings Accounts and CDs Retirement Plan Liabilities (creditors names, monthly payments, and balances)

If you have had prior bankruptcies, the lender will require all of your bankruptcy paperwork.

The main thing your broker will need this: What is your reason for getting a mortgage? Once you have answered that question the rest is pretty easy. You will need different documentation if you need a mortgage for a construction loan vs. a refinance.

At settlement, you will be required to present a photo identification. To avoid complications at closing, it is a good idea to give to your mortgage broker a copy of the identification at application to ensure that the loan docs have the correct spelling of your name.

If you are paying off credit cards or other consumer debts through the proceeds of your mortgage loan you will need to provide escrow or the settlement agent recent copies of the statements from these accounts. This is so the correct amount will be paid and mailed to the correct address.

If you have had a divorce, the lender will most likely require your divorce decree.

It is better to provide the broker with more information and have it be not needed. If you undersupply the broker with what’s been requested then your holding up your own loan.

If you have had past credit problems, some lenders will require letters of explanation of the credit problems.

The amount of paperwork required may seem overwhelming. Your loan officer or the processor will let you know exactly what they need. After you give them those documents, they may ask for more. It is very important to provide everything as quickly as possible. Often your application does not get submitted to underwriting until everything is received from you.

You will need to document assets if you list them on your application. Generally you will need your last 2 months statements to document the assets. Documenting assets can be the difference to qualifying for the loan desired or qualifying for a little bit better interest rate.

Here is a list of the information mortgage lenders will use to consider your loan application.

If you rent Name, address and phone number of landlords for the past 24 months

If you own real estate Name and address of all mortgage lenders for the past 24 months, account numbers, monthly payments and balances If you’ve sold your home but not closed: A copy of the sales contract If you’ve sold your home, closed, and you will use the proceeds for your new down payment: A copy of the HUD-1 Uniform Settlement Statement

If you’re buying a home Purchase sales contract or offer to purchase and all addenda Furnish contract with original signatures of buyer and seller If a source of your down payment is a gift: Name, address and relationship of donor. Gift funds will be verified in both the donor and recipient’s accounts. Note: Not all loan programs allow gifts to be part of your down payment. For FHA Financing Evidence of Social Security Number and photo identification For VA FinancingDD214 and Certificate of Eligibility For Construction/Perm Loan Signed construction with cost breakdown, builder plan and specifications

For all loans Social Security Number, for borrower and co-borrower if any Employment History For the last two years, employment dates, addresses, salary. Current pay stubs or W-2 forms. Check and Savings Accounts and Certificates of Deposit Location of bank accounts, account numbers and balances; Address of bank if out of town Last 3 months’ statements Stocks, Bonds, and Investment Accounts Broker’s name and address, description of stocks, bonds, etc. Last 3 months’ statements or copies of stock certificates Life Insurance Policies Insurance company, policy number, face amount, cash value, if any Retirement Plan Approximate vested interest value Copy of latest statement Automobiles Make and model of automobiles, their resale value Other Assets Market value of personal and household property Liabilities and Other Non-Mortgage Debt Creditors names, addresses, account numbers Monthly payments and balances

Other income information you may need If you’re self-employed Two years tax returns, profit and loss statements, both company and personal if separate. Current balance sheet and profit and loss statement if more than two months into the new fiscal year, signed by CPA. If you have income from: Commission Overtime Bonus Partnership Rental Property Trust Notes Receivable Interest/Dividends You’ll need two years’ personal federal tax returns If employed in family business Personal federal income tax returns and all schedules for the past two years If divorced or separated Complete executed divorce decree and settlement agreement Payment history of alimony/child support over the past 12 months, if it is a financial obligation. If you choose to have this be considered as part of your income (you don’t have to), be prepared to provide 12 months canceled checks or bank statements reflecting income deposits.

Capacity = Willingness and ability to pay back the loan Credit = Payment history and current balances; willingness to repay Character = Job stability and or time in property Collateral = Property or what the lending institution will be left with if the borrower fails to pay.

Another one of the C’s that is often over looked is Cash to Close. Liquid assets readily available to pay the down payment, closing costs, and prepaid items of a mortgage transaction.

Credit is one of the most important things a borrower must be aware of when buying a new home. The credit report is a representation of how you pay your bills. If you have great credit. A Bank is willing to finance up to 106% . Which would allow a person to purchase a house with no money down.

Character – from the standpoint of underwriting, lenders are usually looking for a minimum or two years work history at the same company. If you have changed companies in the past two years, but are in the same line of work, as long as your income has stayed the same or increased lenders will accept that. The longer you have been employed with the same company and in the same line of work the better off you are and the more lenient the lender may be on other factors.

Knowing what lenders are looking for and planning to provide them what they need in order to fund your loan is the best way to make sure you can get the best loan for you.

From an underwriting perspective, if a loan package is significantly strong in one of the “C” areas, deficiencies in another “C” can be given less weight. Example, if a borrower is putting down a large down payment the Collateral would be stronger so a weaker credit score might be tolerated.

Credit - Although there are a few programs that are not credit score driven, by far you will be able to secure a better rate if your credit rating is good. Payment history plays a big part in your credit score and this shows the lender your track record of payments to your creditors. It’s more probable that you will pay your loan on time if you pay your other bills on time. If you have high balances on your other debt such as credit cards and automobiles this can affect your Debt-to-income (DTI) ratio and put you at more risk in the eyes of the lender. The reason good credit scores are important is because you have the ability with good scores vs. bad scores to qualify for no income verification or no documentation loans.

Collateral-From the standpoint of loan underwriting, the higher the stake a homeowner has in the property, the less likely he would default on the mortgage. Statistics have shown that if homeowners have 20% or more in equity in their homes, lenders are less likely to suffer a loss as a result of default. For home buyers who have less than 20% to put down as down payment, many banks are willing to grant them loans as long as these home buyers have other compensating factors, such as a better than average credit profile, or a low debt to income ratio. As a safety measure, most banks require home buyers putting down less than 20% to carry Private Mortgage Insurance, which insures the banks against loss due to homeowner default.

Capacity - Capacity goes hand and hand with credit. When a lender reviews your credit there are 2 major factors they are looking at aside from credit scores. One is your DTI or Debt-to-income ratio and the other is your credit history. Both of these will determine your capacity to repay the loan or your risk to the lender.

Capacity also refers to the amount of debts you can realistically pay given your income. Creditors look at how long you’ve been on your job, your income level and the likelihood that it will increase over time. They also look to see that you’re in a stable job or at least a stable job industry. It’s important when you fill out a credit application to make your job sound stable, high-level and even” professional.” Are you a secretary or are you an executive secretary or the office manager? Finally, creditors examine your existing credit relationships, such as credit cards, bank loans and mortgages. They want to know your credit limits (you may be denied additional credit if you already have a lot of open credit lines), your current credit balances, how long you’ve had each account and your payment history—whether you pay late or on time.

A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditors claim by providing a collateral source.

Judgment is granted to a creditor who has proven in a civil court that a debtor is liable for damage. When the creditor cannot collect the judgment from the debtor, or when the judgment amount is not significant enough to warrant a collection process, the creditor usually files a lien on the debtor’s property. Such judgment lien is present on the property title report when the debtor refinances or sells his property. The debtor must satisfy any liens on his property when he refinances the mortgage or sells the property. A judgment lien filed by a professional who performed work on the property (such as builder contractor) is often referred to as a “mechanic’s lien”.

Some judgments may show up as a “cloud” or lien on the title to a property owned by the judgment debtor, others may not. The procedure to have a judgment attached to the title will vary from state to state. For example, in California you must record an “abstract of judgment” in order for a judgment to attach as a lien to any real property owned by the debtor.

Always consult your mortgage broker as to which actions should be taken in regards to the judgment.

Although there are lenders who will allow the judgments if they are subordinated to the second position.

Lenders typically require that all judgments that effect or potentially effect the title be paid prior to the closing of a mortgage loan.

Other sites: Mortgage Broker | Fixed-rate mortgage | Delinquency | What not to do after you apply for a Mortgage | Will Stated Income Work for You| Pay Option Arm Calculator

After your bankruptcy is discharged your credit score will fall dramatically. There are however ways to rebuild credit and increase your score quite easily. One of the best methods is a secured credit card. These cards are fairly easy to obtain and are available through most major banks. Rent to own centers often report to the credit companies and are another great way to rebuild your credit. Just be sure to keep the payments manageable to avoid repeating the financial problems you are trying to recover from!

When rebuilding your credit after a bankruptcy it is extremely important to make all of your payments on time. Any adverse payments on a bankruptcy will limit your options on obtaining a mortgage.

If you are in a bankruptcy or have been recently discharged, you may still be eligible to refinance your home. Your mortgage broker will have programs that can fit your needs. Whether its taking a little cash-out, or simply paying off some items not covered in the bankruptcy, it is a good idea to refinance to get you back on your feet.

Many of our customers rebuild their credit by using their home equity to refinance and take cash out to consolidate debts and pay off all of their old bills, giving them a lower total monthly obligation which they can pay consistently every month. It is a fresh start for customers who are coming out of a bankruptcy, and paying a mortgage on time month after month is a great way to improve their credit score.

Make sure that all of your paid off credit cards are closed out. You should give your credit card companies written request to close your accounts. Open credit lines with a zero balance (especially if you have many) can potentially hurt your credit rating. Only keep the cards you use regularly and the ones you have had the longest.

You should check your credit report three to six months after the bankruptcy discharge and make sure the discharged accounts are being reported as “discharged in bankruptcy”. Oftentimes, creditors report the discharged accounts as charge off, collections, open unpaid or other such ways which will have a more detrimental effect on your credit score. It is very important that you keep all bankruptcy papers, especially the list of discharged creditors.

If you have not filed your bankruptcy yet, be sure to consider carrying some liabilities through the BK (i.e. do not include them in the bankruptcy). This can dramatically influence your ability to re-establish credit following the filing, but is not always available.

There are five major types of information used to calculate a FICO score and they are listed below. Each type of information counts as a percentage of a total FICO score and the calculations may vary a bit from each credit agency. This is a good rule of thumb to follow: - 35% Payment History - 30% Amounts Owed - 15% Length of Credit History - 10% New Credit - 10% Types of credit

Using credit is a proven way to re-build credit after bankruptcy. If you cannot get a credit card, apply for credit from department/drug stores and gasoline companies for expenses that you normally pay cash for. Also apply for a debit card, which you need to first deposit funds. You may also want to have a relative co-sign your credit application to ensure approval. Most important of all, once you are extended credit, be certain to make payments on time.

Once your bankruptcy has been discharged your credit will need to be cleaned up. Keep copies of all bankruptcy documents and attain documents from each creditor (credit cards and collection agencies) that indicate that the debt was removed via bankruptcy.

A FICO score is a number that rates a borrowers credit record. The score is based on a number of factors, including how well debts have been paid off, current levels of debt, types of credit, and length of credit history. Scores generally range from 350 to 900.

However if you are applying for a very aggressive loan, like a pay option arm, or responding to a promotion for excellent credit borrowers, multiple recent mortgage lateness’s will make it very challenging for us to get you a loan with the terms you are expecting. More than your improving your FICO score on your credit report, working to remove lates through credit repair will help ensure you get the home mortgage refinance or buy new home mortgage you deserve.

If there is incorrect information on your credit report such as a payment that was reported late that should not have we will be able to correct the information within 3-5 days by going directly through the 3 major credit bureaus and get a rescore to reflect what your credit score should be.

Credit scoring has been utilized by lenders for over 30 years. Credit scoring is a technology used by credit grantors to qualify the risk associated with extending credit to a given borrower. Risk is quantified by means of a score card which calculates a numeric value, or score, for a credit applicant a lender wants to evaluate. Score calculation is done based on information that has been determined to be indicative of future credit performance. There are many types of scoring methods currently utilized today including credit scoring, applicant scoring, behavioral scoring and several others. The type most relevant to the mortgage industry is credit scoring and among the most widely recognized is the FICO SCORE.

You should periodically review your FICO score and see if there is anything you can do to improve your score.

The are five main categories of information that the FICO score evaluates:1. Credit Payment History: 35% 2. Credit Balances: 30%3. Credit History: 15%4. Credit Inquiries: 10%5. Credit Types: 10%

Credit Payment History: 35%At 35% Credit Payment History weighs the most. While events such as a bankruptcy, foreclosure or tax liens will have the greatest negative impact on your score, multiple and/or recent late payments have a tremendous impact as well.

A new law allows borrowers to receive a free copy of your credit report from each of the credit reporting agencies every year. Visit www.annualcreditreport.com

The Fair, Isaac Corporation,(FICO) developed the formula for credit scoring. In general, the higher the score, the more creditworthy a borrower is in the eyes of the lender. A score of at least 680 indicates the borrower is very creditworthy.

Credit Balances: 30%What is your credit balance to your credit limit? The Outstanding Credit Balance ratio has the second highest weight on your credit score. High balances on your credit cards can be viewed as a red flag since it’s an indication that you may be overextended. If you have multiple credit cards, you may want to spread the wealth to keep the credit balances to credit limit ratio low.

Credit Inquiries: 10%Opening a new credit account doesn’t harm your credit score dramatically especially after you make the first payment. However, credit inquiries can negatively impact your score. Generating many credit inquiries exudes that you are trying to secure a large amount of credit or you are being turned down by lenders and have to apply elsewhere.

FICO score is one scoring system used by Experian, a credit profiling company. Two other companies have similar scoring systems that are just as widely accepted by lending banks. Together with Experian’s FICO score, credit reports that contain Trans Union’s Empirical score and Equifax’s Beacon score are often referred to as the Tri-Merge Report.

To keep a healthy or high FICO score you will need to at the very least do these 3 things:1 - Keep your balances on your credit cards to 50% of what your limit is2 - Always pay your bills on time - if you have to hold a bill and pay late make sure it’s not more than 30 days to post. 30 day lates really bring your credit scores down 3 - Try not to cancel cards you have had for a long time. Length of time on accounts plays a part into the scoring

For more information on how credit scores are developed, please visit: air, Isaac and Company (FICO)www.fairisaac.com200 Smith Ranch Road San Rafael, CA 94903ph: (415) 472-2211

There are many credit fixing agencies that will help raise fico scores for a potential borrower so they can put themselves in an overall better position for obtaining a loan. If your fico scores are low, there are still plenty of things that can be done to help bring scores up. Sometimes it takes little time and sometimes it takes longer but in the end the results can be fantastic.

Credit History: 15%Credit History is a reflection the length of time that you’ve had accounts open. You’re rewarded for keeping long term debt. Older credit accounts that have been used more frequently will have more weight than those that are newly opened or used with less frequency.

Most lending institutions categorize scores in to ranges. Generally scores above 800 are considered excellent, scores from 700-799 are considered good, scores from 600-699 are average, scores from 500-599 are considered poor, for scores below 500 there are very few lending options available. There are many lenders and each has their own guidelines for qualifying borrowers.

Credit Types: 10%This percentage of your FICO score is based on your mix of credit. Do you have a good mix of credit cards, retail accounts, installment loans, finance company accounts or mortgage loans? It looks at the whole picture and totals how much of each type of account that you have.

In the early 1980s the three major credit bureaus, Experian, Equifax and Trans Union all worked with the Fair, Isaac company to develop generic scoring models that allow each bureau to offer a score based solely on the contents of the credit bureau’s data about an individual. Creditors-especially those in the mortgage industry-frequently use the scores when deciding who receives loans. They can order your score, commonly called a FICO score, from one of the bureaus, but it only draws upon information from your credit report. Individual creditors often also consider other information, such as your salary or how long you have been employed at the same company when making loan decisions.

Your mortgage broker will be happy to review your FICO score and your complete credit report with you in detail, which is often a much better alternative to struggling to make sense of the abbreviated reports delivered by free credit report websites. Ask your mortgage professional for more information about this important subject.

Most people do not have perfect credit. Most people have FICO scores ranging from the low 600s to the high 700s. Mortgage applications typically are not rejected because of a few late payments.

With a debt consolidation loan, all your debts will be consolidated into one simple monthly payment. Debt consolidation works to eliminate your late fees and reduce your interest rates to make that one monthly payment lower than ever. Avoid taking drastic steps such as bankruptcy Debt consolidation programs are viewed as positive by banks and creditors. By engaging in a debt consolidation loan, your creditors realize you are making a good faith effort to repay your debt. Creditors are willing to work with debt consolidators to reduce your payments and in turn, your debt. Pay off your debt quicker and easier than you ever thought possible with a debt consolidation loan.

The ability to convert short term debts into small long term financing is one of the most powerful arguments for refinancing, and can help reduce your total monthly expense by up to 50% or more.

When should you consider a refinance for debt consolidation?1. If you are only able to pay the min balance on credit card debt each month. 2. If you have credit cards with high interest rates.3. If your credit cards are maxed out.4. High interest auto or recreational vehicle loans5. High interest personal loans or college loans

Not only can a refinance save you money each month, but for many people debt consolidation refinance: Is a second chance to get their finances under control. Provide an opportunity to learn how to better manage their credit in the future. Very often can improve your credit score, which in turn could save you more money by giving you access to better insurance rates.

In most cases you can deduct the interest paid on your mortgage on your federal taxes. You cannot deduct interest paid on credit card, vehicle or personal loans on your federal taxes.

Why would you want to pay 18-24% interest on credit cards when rates are 1/3 to 1/4 of that for your home. It just doesn’t add up and make sense to continue to pay those high rates when you have the option of lowering those rates. This can save you thousands of dollars not to mention you will only have to write one check instead of multiple checks every month.

You will not always be able to consolidate all of your debt. If you simply have too much debt to consolidate, you should focus on paying off the accounts with the highest interest rates first.

It is important to understand that although a consolidation loan may help you get your finances under control, it doesn’t “eliminates debt”, as some unscrupulous companies claim. Rather, it rolls all of your debt into one loan, with one payment and one interest rate. Debt consolidation should not be seen as an open door to apply for more credit. It should be seen as a tool that will help you get your finances under control, once and for all.

Homeowners who are heavily in debt and have difficulty managing their finances should always consult with a financial advisor before using debt-consolidation loans to get temporary relief. By taking out a debt-consolidation loan, which uses the home as collateral, to pay off credit card debt and other obligations, which are unsecured debts, essentially transfers all unsecured debt into one that is secured by the home. While defaulting on credit card debts usually leads to nothing more than a bad credit profile and some collection calls, defaulting on a mortgage can result in foreclosure of the home.

An “inquiry” is a listing of the name of a credit grantor or authorized user who has accessed your credit file. Credit grantors post an inquiry before offering you a pre approved credit application. Some examples of those who can access your credit files are: Credit Grantors Collection Agencies Insurance Companies Employers

While inquiries on your credit report can reduce your credit score, they only account for 10% of your total credit score. Payment history and outstanding credit balances impact your credit score the most.

This allows a few different mortgage companies to pull credit within that 15 day window and not affect your score as it would normally when you are in the process of obtaining a mortgage.

Not all inquiries effect your credit score. Such as inquiries made by creditors you currently have an account with.

Also, inquiries made by you will not impact your credit score.

Many times you will have to write an explanation letter when applying for a mortgage if there are a large number of recent inquiries. The lender wants to make sure you have not taken on new debt that has yet to show up on your credit report.

Allow it is true that too many inquiries can have a detrimental effect on your credit score, the scoring system allows for unlimited inquires in any 15 day period to only count as one inquiry. The scoring system works that way to allow consumers to “shop” for credit without fear that their scores will be damaged.

You will damage your credit if you spread your mortgage shopping over many months. Because the market can change from day to day, it makes little sense to do this in any case. Try to keep it within a two week time frame.

Inquiries not initiated by you do not negatively affect your credit score. When credit card companies pull your credit report to offer you credit without you first applying for it, your score is not affected, regardless how many companies pull it or how often.

Inquiries made by junk mailers and such does not affect your score since these are not consumer initiated applications. However, if you respond to one of these offers, then a credit file inquiry is made and your score is lowered. What should also be noted is that if your credit file is perfectly clean, you should not even be concerned about this 5 point penalty on credit inquiries .

Your credit report only shows inquiries made in the past 90 days. After the 90 day period inquiries are removed from your report.

Opening a new credit account doesn’t harm your credit score dramatically especially after you make the first payment. However, credit inquiries can negatively impact your score. Generating many credit inquiries is a flag that you are trying to secure a large amount of credit or you are being turned down by lenders and have to apply elsewhere.

Each individual lender and program has its own guidelines for how many inquiries of what type, over what period of time, may be considered “excessive” for purposes of offering you a mortgage loan.

If you need a loan, do your rate shopping within a focused period of time, such as 30 days. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.

Many bankers used to get nervous if they see more than two or three recent hard hits in your credit file, because it means that you have applied for new credit accounts that might not have appeared on your report yet. In today’s world it is considered “shopping”.

Frequently asked questions on collections:

Q: Can I still get a home mortgage loan with open collections showing on my credit?

A: Yes you can

Q: How do I get these collections removed from my credit?

A: Accurate negative items reported on your credit can be reported on your credit for 7 years.

Q: How come only some collections report to my credit record?

A: Each creditor, collection agent, lender, etc… can choose to report items to your credit report or not. Some will report not report to any credit repositories, some to only 1 credit repository, some will report to 2 repositories, and some will report to all 3.

Q: Do medical collections negatively affect my credit score?

A: All collections can negatively impact your credit score.

Q: I have heard paying off collections is worse than letting them be so is it better to pay off the collections or should I just leave them alone?

A: This is a very tricky situation and should be approached on a case by case situation. While you should always pay off true debts that you owe money for, sometimes it may be better to wait until after you have obtained financing for a home and sometimes you may need to pay collections off beforehand. Please consult a mortgage professional to find out what will help you most right now and to map out a financial plan.

Q: I cant afford to pay the collections off, what can I do?

A: You can call your collection companies and see if you can get them to lower the amount owed. This is very common and is highly recommended before paying off any collection. Many collection agents will bargain with you and some may even go down to 50% of the original balance. These questions are just a small sampling of some of the questions that are asked everyday by homeowners and people looking to buy their first home. Please contact your personal mortgage advisor today to find out more information about credit, collections and financial planning.

It is important to note that when you contact a collection agency and barter down a payoff amount that it will show on your credit report as “settled less than amount owed”. If an account has just gone into collections, try contacting the original creditor and paying them directly. You may be able to negotiate fees and finance charges being “removed” and then paying the debt in its entirety. Make sure you get a letter from the creditor stating the debt has been paid in full.

Not only will your mortgage advisor have answers and resources available to answer any questions, they will also have trusted relationships to recommend for your home purchase, your credit issues and your over-all financial goals.

Not all collection accounts need to be paid off. In many cases when buying a home or refinancing, the only items that need to be paid off or addressed are those items that appear on title. This is not a conforming guideline, but nonetheless is a loop-hole around having to pay them off at the time of buying or refinancing your home.

Repairing your credit, or restoring as some like to put it, is best done by a professional company. Your mortgage broker will refer you to a reputable company that can remove items like collections from your credit file. As a general rule, if it can go on your credit, it can come off too. The 7 year rule is only the maximum amount of time a derogatory can stay on your credit file.

Most subprime and Alt-A lenders will ignore open medical collections completely. Also most of these aggressive lenders will over look a certain dollar amount of collections that were opened in the last 12 months. And most collections older then 24 months will be ignored by most subprime and Alt-A lenders.

Some lenders allow all collections, judgments etc to stay open, as long as your score meets the criteria. If you have re-established credit and have a score in the upper 500’s, you can still qualify for 100% financing while having open, old collections. Contact us now to have a broker analyze your situation .

The new allowable limits for collections on your credit report is $5000. If your credit report show $5000 or less you may not have to pay them off. If it is over the $5000 then all of the collections will need to be paid. If you are receiving a non conforming/subprime loan the guidelines vary greatly and you may not have to pay any off.

It is also important to keep in mind that updating credit reports can take some time. Even if you paid all your collections today, it could still take 30-45 days before this reflected on your credit report. The most important thing is to get every interaction with your creditors in writing. If your arrangements are not in writing, they may not mean anything.

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