Cynthia's Chat

With all the fallout from the mortgage bailouts and the increase in foreclosures, mortgage companies have tightened their credit standards for obtaining a mortgage.  It is a little harder, but still doable if you take the time to get your credit in shape before applying for a mortgage.

There are tons of Credit Repair companies who want to clean up your credit for a fee.  But you can do the very same things yourself with a little time and knowledge.

Here are ten ways to make your credit report a little prettier to look at:

1.  Pay on time!  Duh!

2.  Pay down balances.....but not all the way.  For the highest credit score, you want to show that you are actually using credit, so keep a small balance on a few accounts.  Having all paid balances actually brings your score down a bit.

3.  Ask for an increase in your credit line.   Having access to a large amount of credit, but only using a little of the credit, makes your credit profile stronger.

4.  Your mortgage credit history weighs heavier than other lines of credit.  Pay this one first and always!  It is easier to overcome a late payment on a credit card than a late payment on a mortgage.

5.  Along the same line as above.....not having a mortgage brings your score down somewhat.  If you plan to sell your home and then buy another, get qualified for your new mortgage before the old one is paid off.

6.  Get copies of your credit reports and contact the bureau with any inaccuracies.  You can get a free copy of the three major bureaus at www.annualcreditreport.com .  Some corrections to look for is your work history, your address history and mistakes on dates of mortgages and lines of credit.  Sometimes "good" lines of credit are not reported.  You want to make sure you have the good stuff reporting to the credit bureaus.  Make sure paid loans within the last 5 years are showing.  Also, the older a line of credit is, the more power it has -either good or bad - on your credit score.  If you have an older line of credit that is not showing, ask that creditor to report it to the credit bureaus.

7.  If you have collection accounts, call the original creditor (not the collection company) and ask for the opportunity to "pay in full" in order to have the derogatory information removed from the credit file.  Some will entertain this and some won't, but it is worth a try.  And you owe the money to the original creditor, not the collection company who bought the debt for pennies on the dollar.

8.  Write to each credit bureau and dispute derogatory information on your credit report (even if the information is accurate).  If you have several derogatory lines of credit, dispute a few this month, and a few more next month.  You will see some of the derogatory lines drop off, if you consistently do this.

9.  Do NOT talk to a collection company unless you are willing to settle with them right now.  Each time you talk to a collection company regarding a late payment or defaulted loan, the clock resets for the time period the item will remain on your credit report.

10.  Go to www.creditboards.com and read, read, read.  This website is full of information about cleaning up your credit report and keeping your credit good.

Are you or someone you know feeling the pinch of a mortgage payment that's too BIG?  While all the big banks, automakers and Wall Street have their hands out, you should know that the bailout includes homeowners. 

But BEWARE!  When money is given away, there will be scams, and this bailout has plenty of scams associated with it.  Your email inbox may have already been blown up with offers to see if you are eligible for this help for a "small fee".

There should never be a fee to find out if you are eligible for the program.  Nor should there be any additional fees associated with these programs other than typical closing costs and points that the Lender would normally charge. And a third party is not needed to determine your eligibility.

By now you must be asking, 'What is the the government mortgage bailout program'?

The premise behind President Obama's plan to rescue the housing market is his belief that restructuring distressed mortgages will help struggling borrowers to stay in their homes and put an end to the free fall of market values.

 There are two programs within the Making Homes Affordable Act.

1. The Home Affordable Refinance is designed for homeowners whose home has depreciated to the point that they are not able to obtain a refinace in a conventional manner since their loan to value exceeds 80%.  Qualifying borrowers will have a Freddie Mac or Fannie Mae loan, occupy the property and have a stable and on-time mortgage payment history.

2. The Home Affordable Modification is for homeowners who are in imminent danger of defaulting on their loan.  The mortgage providers will have a cash incentive to modify the terms of the loan to make the payments affordable.  There is an incentive for the borrower to make on-time mortgage payment and have their principle balance reduced after a certain number of timely payments.  The borrower ust occupy the home.

To find out if you are eligible for the Homes Affordable Refinance, call your mortgage company's customer service.  Ask if your loan is held by either Freddie Mac or Fannie Mae.  If your loan is anything other than Freddie Mac or Fannie Mae, you are not eligible for the refinance. 

The next question to ask is if your mortgage company is participating in the Home Affordable Refinance program.  Mortgage companies are not required to participate, although there is a cash incentive to do so.

To find out if you are eligible for the Homes Affordable Modification, call your mortgage company's customer service and ask if you are eligible.  The servicers are required to participate in the modification program unless they have obtained a waiver.

Here is a link to the government site where you cansee if your home is eligible.  As a caveat, I put in an address of a home that I knew had a Fannie Mae loan, and it wasn't found on this search. 

Or you can wait and see if you are contacted by your mortgage company.  Most mortgage company servicers are going through their portfolios and identifying qualifying borrowers.  If your mortgage company is doing this and you are a qualifying borrower, you will receive a letter from them letting you know you are eligible for one or the other programs.

 Thought you would like to know...........