Rental history has gone unnoticed on credit reports for years. Families all over the U.S. have been making their rental payments on time with no credit toward their credit reports. Experian recently announced that they would be adding rental history to their reporting and will be the first major credit bureau to do so.

There are roughly 103 million Americans currently renting. According to Experian, with that many Americans the Bureau felt it was necessary to give those renters credit for their good history. In the past only negative history made it on their reports and now they will report the positive history.

In the world of mortgage a good rental history is never counted as good credit like a credit card history on your credit report.. It is usually necessary to have a good rental history to show you can make your payments on time. Lenders found this out by getting a verification of rental from the land lord.

With this new feature of reporting to Experian your history will be available on your credit reports. Once Experian makes this information available the scientists at FICO will determine whether rental history will be able to predict credit risk in the future. This information will also determine whether FICO will add this history to their scoring model.

In the past this type of history is considered non-traditional history. Other examples of this history would be your electricity payment, water bill payment, car insurance payment; all of these types of payments are non traditional history.

Some government loans such as FHA will allow you to get such history to show credit worthiness. But in most cases the way any of this non-traditional history shows up on your credit report will be as a result of a collection for non-payment.

This new reporting feature could be good for some Americans if they make their rental payments on-time and Experian does not report the late payment history. Currently if you are late on your rental payment that history goes un reported to your credit report. With this new feature of reporting only time will tell how it will affect credit reports and scores.

CreditScoreQuick.com

The requirements to get a mortgage loan in 2011 are just as stringent as it was in 2010. There has been lots of Federal regulation implemented in the banking industry that has caused some issues. Over regulation is never good for any industry but in some cases are necessary to protect the consumer. Nether less here are the requirements for mortgages currently.

Credit Requirements
Most lenders are going to require a minimum 640 credit score to get a mortgage loan. This means out of all 3 credit bureaus your middle credit score needs to be a 640 or above.  Now there are some lenders that will go lower on your credit score requirement, but the rules are strict. Most of these lenders will require down payment (No Gifts Allowed) and 3 to 4 months mortgage payment in the bank after you close. In most cases even though a lender advertises they provide financing for scores below a 640, the guidelines typically make it tough to get financed. Let’s just face the facts. If your score is below 640 in this current market it is extremely tough for banks to sell that loan to other banks. So most banks only finance loans that are marketable.

FHA Loans
FHA has their own guidelines for loans they will insure. Remember FHA is not a bank, but a government agency that insures loans provided by FHA approved lenders. Even though FHA has its rules, a bank will have a set of its own rules as well. A bank in today’s market in most cases is only willing to finance FHA loans down to a 640 credit score. FHA however will insure loans down to a 540 credit score with 20% down. So there is a lot of confusing information out there about who will do what. You will find that most lenders will not provide financing for loans with credit scores below a 640. FHA also requires that you put down a minimum of 3.5% of the sales price.

Conventional Loans
Conventional loans are typically for borrowers with money to put down and good credit scores. Most lenders in this current market will require a 660 credit score to get a conventional loan financed. In most cases a credit score of 720 or above is ideal for conventional loans. Since conventional loans are approved through automated underwriting engines created by Freddie Mac and Fannie Mae, the higher your credit scores are the better terms you will get. Conventional loans currently require a minimum of 5% down of the sales prices.

VA Loans
VA loans are loans for veterans. This loan is 100% financing currently and most lenders require a 620 credit score. A DD-214 will be required to show you were honorably discharged. This is a very popular with veterans because of the terms.

USDA
USDA is a loan for rural areas. If you don’t mind driving from a suburban area, this is a great loan. The loan is 100% financing and currently some lenders will go down to a 620 credit score. You also must qualify with the medium income requirements for the area you are buying in. Like any loan there are restrictions with this loan, but the terms make it attractive for moderate income families.

Needs List for a Mortgage Loan
There is basic information needed to get a mortgage. Here is the list.

1.    Last two years W2’s
2.    Last two years tax returns (all pages) This is new and a couple years ago was only required for the self employed and for those whose income was 25% or higher commission based..
3.    Last 2 months bank statements ( all pages)
4.    Last 30 days paycheck stubs
5.    Landlord Name & Number

The needs list provided is a standard list most banks use. During the application process a loan officer or underwriter may require additional information depending on your particular circumstances.

You’re Credit Report
An educated consumer saves money typically. Especially if you know what your credit scores are. After all lenders are in business to make money like any other company. If you walk into a loan application without a clue in regards to your credit report the lender will attempt to charge you more. Make sure you know what is on your credit report along with what your credit scores are with all 3 credit bureaus.

Conclusion
I don’t expect lenders to lower the bar anytime soon. After recent bank failures all over the country I don’t blame them.

The government is still pressuring banks to lend again, even after the recent banking debacle. A matter of fact all banks are lending to those who have the credit to get a loan. It only makes sense to lend to borrowers that show responsibility and have a stake in the loan which would be in the form of a down payment. Being able to get a loan with a 620 – 640 credit score in my opinion is still pretty risky.

Mike Clover

CreditScoreQuick.com

The FTC released a 4th interim report to Congress laying out the progress the agency has made on a national study examining the accuracy of credit reports. The FTC currently is doing a study on the accuracy of credit reporting and is directed to report that information to Congress.According to the FTC they are to conduct this study every two years starting in 2004 through 2012, with a final report in 2014.

This study will be based on three topics in the credit reporting process:
•    Consumers
•    National consumer reporting agencies
•    Furnisher of information to the reporting agencies

There are approximately 1000 random consumers in this study that have been selected throughout the nation. These consumers will review their credit report from all three national credit bureaus with a credit expert who will point out potential errors on their reports. The study participants will be encouraged to dispute errors that could affect their credit rating. These disputes will be sent directly to Fair Isaac Corporation (FICO) for rescoring.

This study will estimate the number of consumers who will find errors and reveal the main types of errors, their frequency, and their impact on the consumer’s credit rating. This study will categorize errors by type and the seriousness of the error along with potential consumer harm.

As of 1/12/2011 the FTC stated 295 consumers had already participated in this study. The FTC stated the data collection phase should be done by October 2011. The next interim report to Congress is due on December of 2012 which will provide full analysis of the collected data.

CreditScoreQuick.com

A short sale is where you sale your house for less than you actually owe. This process has to be approved by your bank. There are a great number of issues with this process. The main problem is while getting approved for a short sale the bank will require you to stop making your mortgage payments. The other issue is there really is not much difference between a short sale and a foreclosure on your credit report. To make matters worse while getting approved for the short sale and after you have quit making your payments the bank can deny your request.

John Ulzheimer has discussed how short sales affect your credit and how there is not much difference between the two according to Fair Isaac. Both are negative on your credit report. Also while in this arrangement you will more than likely get a 90 or 120 day late payment on your mortgage history. Most banks will consider a 120 day mortgage late payment a foreclosure anyways. So you might be asking yourself what is the benefit of a short sale? I have been asking this very question my self since the inception of this program.

According to John Ulzheimer’s article at Mint.com a short sale is better than a foreclosure because the seller will keep up the home while marketing their home during this process. For example, mowing the lawn, keeping the house clean, etc….and avoiding theft of copper pipes in the home, etc…. While I partially agree, it’s still a lot of trouble considering the fact that when it comes to your credit report and scores there is not much difference between a foreclosure and a short sale.

I am not saying foreclose on your home, but keep in mind that either way it’s a tough situation on your credit rating long term.

Let’s assume you get approved for your short sale. You list your home on the market for $20,000 less than what you actually owe on it. Your home gets a contract in 15 days and you close on your home in 60 days. Now you have a 60 to 90 day late payment on your credit report. Keep in mind that you are not making your mortgage payments because the bank made you stop… I would have to say this is better than a foreclosure. At least you sold your home before you got a 120 day late on your report.

Let’s assume your company is transferring you out of state. Your home is $30,000 in the hole due to value issues in your area. This is another situation where you may not have a choice but to enter into a short sale arrangement. Now you could sell your home for $30,000 less without doing a short sale and pay the difference at closing…If you did this your credit rating would not be affected. Of course who is going to do that?

My conclusion, a short sale and a foreclosure are about the same. In a perfect scenario where you sale your home fairly quickly, then a short sale could be beneficial even though it reports on your credit report as a settlement or charge off. Which by the way…will affect your credit rating. But let’s face the facts. Homes are not selling quickly in this current market. The average home is taking around 6 months to sell and in many cases longer depending on what part of the country you are in. So either way it’s a tough decision that will affect your creditworthiness one way or the other.

Mike Clover

CreditScoreQuick.com

I wanted to start out the year being positive, but I am a realist. I definitely don’t want to mislead people by not telling the truth. I believe we all would agree that times have been tough since 2007. With unemployment currently at 9.3%, you begin to ask yourself if and when are we going to recover from this economic downturn. Here is my prediction.

Job Creation

In order for this country to recover, jobs need to be created. The question I have been asking all along is how can we create jobs when our jobs are being outsourced over seas for cheaper labor? There is not enough data to give any statistics on outsourcing of jobs, but I would have to predict it is not good for our country. Until jobs are created in this country there will be no recovery. Corporate companies reducing costs to be competitive has caused the outsourcing of our tech jobs as well. This in my opinion is a reason to be greatly alarmed. The tech sector is a big part of our economy currently. We will see more people become entrepreneurs not by choice, but because they cannot find jobs.

Government Regulation

During the last two years we have seen businesses being over regulated by our federal government. This process of regulation has caused a bottleneck in economic growth. Like Ronald Reagan said … “Government is not the solution but the problem.” With the interference of government you can count on economic growth to be hampered. We will not see much growth in our free market until government gets out of the way.

Housing

We hear all kinds of statistics. I live in Texas which by the way is one of the best economies in the US currently. Don’t let anyone mislead you; the housing market is a major debacle. I will be the first to tell you that the real estate market has not hit bottom yet. I predict that interest rates will increase and values will continue to fall. I don’t see the real estate sector improving for the next 4 to 5 years unless we figure out a way to create jobs.

Credit Education

What is that old saying…? “I wish I knew back then what I know now….” Well when it comes to credit education there has been a lack thereof….I predict with all the financial turmoil amongst families, credit education will be top priority. We recommend staying informed about credit through our site. Credit education is the first step to financial freedom.

I am optimistic, but at the same time like I said earlier I am a realist…We as Americans cannot keep living on credit the way we have been. This also applies to our federal government. They need to stop the unnecessary spending as well. Until these changes take place, we have a long road ahead of us. Lastly credit education is crucial from here on out as well.

CreditScoreQuick.com

According the EEOC Kaplan Higher Education Corporation has been discriminating nationwide against black job applicants because of their credit history. As a result the U.S. Equal Employment Opportunity Commission (EEOC) has filed a law suit against the provider of post-secondary education.

According to the EEOC this rejection of black applicants has been taking place since 2008. The EEOC claims this practice is unlawful and is discriminatory because there is no justification of this of this process based on Kaplan’s business necessity.

Most companies that look at your credit report during the hiring process usually do so for positions that handle money or have access to personal information. Keep in mind that during the employment screening process they do not look at your credit scores. Now your credit scores and credit report information do go hand in hand. So the company looking your credit report will ultimately have an idea your scores are poor if you have a history of credit issues. So the FACT that employers don’t look at your credit scores in my opinion does not really matter. Bad credit is bad credit…..

This practice of hiring based on credit history is somewhat controversial. Being a business owner I have the tendency to agree with the employment screening process. The question always arises…. “How can you be responsible in the work force if you have a history of being irresponsible with your personal credit history?” So bottom line is your personal matters will affect your worth ethic. How can you come to work with a clear mind if your financial matters are in distress I guess is the point here.

According to the Federal Reserve black Americans have worse credit than white Americans. I am not sure why this is the case, but evidently it’s a problem amongst the black community.

The Fact of the matter is whether you are black or white your credit report is being looked at during the employment screening process. With the case of Kaplan the EEOC needs to prove that they have been discriminating against blacks and have singled them out during their hiring process.

Regardless of this controversial hiring process your credit report is no secret anymore. Somone will require you to provide your history of responsibility whether you are Hispanic, African American, Chinese or White American.

Bottom line, if you are staying on top of your credit report the issue of credit will never be a problem during the hiring process. Like I have been promoting all along, credit education is crucial during such bad economic times.

You have a right to your free credit report once a year from all 3 national credit bureaus. Go to www.annualcreditreport.com to get your copy.

Author: Mike Clover

CreditScoreQuick.com

John Ulzheimer took the words right out my mouth today. Here is some great key points on what will not affect your score per John.

Six Financial Blunders That Won’t Kill Your Credit: MyFoxATLANTA.com

There are many credit score myths being told by professionals that should know better. During my mortgage career I have heard all kinds of myths and some flat out lies. Regardless of the intention of a lender, I am going to discuss the facts about what will really affect the credit scoring process. Now don’t get me wrong there are some really good lenders out here, but some are not be forthcoming either.

Pulling your FICO score will lower it.
One of the biggest myths is getting your credit report pulled by multiple mortgage lenders will lower your score. This has to be one of the biggest sales tactics in the entire mortgage industry. Lenders are telling you this so you don’t shop around. They are trying to win your business, but really are not telling you the truth.

Fair Isaac aka FICO allows you to get your credit report pulled multiple times during a 45 day window while mortgage shopping and all activity will only be one inquiry. It makes no sense for FICO to penalize you for shopping around for the best terms and rates on a mortgage.

So the next time a lender tells you that if you pull your credit report with another lender it will affect your score, he /she is not being honest with you, or they don’t know the facts. Keep in mind that a hard credit inquiry could lower your score around 5 points or so. Just remember in order to get a loan your credit has to be pulled. I wrote an article a while back on what type of inquiries affect your credit score. Go here to read.

Closing Credit Card accounts help your score
I am not sure where this came from, but it’s dead wrong. Closing a credit card account does not help your score. This type of activity to your report affects the following:
•    Length of Credit History – 15% of your score
•    Amounts owed – 30% of your score

If someone tells you to close your credit card account, that is bad advice and could cause a denial on a loan. I have never heard of an underwriter asking a potential borrower to close an account to get qualified for a loan. This just sounds plain silly.

If you have a credit card with a credit limit of 10,000 and you use it occasionally, it’s ok. That is good credit that you have established. So if a professional ask you to close a credit card, I would find another professional to help you.

A Short sale will not affect your credit score like a Foreclosure
In my professional opinion a short sale is being marketed incorrectly by most real estate professionals. We have realtors all over the country pushing short sales and telling the seller a short sale is better than a foreclosure. This simply is not true. According to Fair Isaac the maker of the FICO Score, there is not much difference between a foreclosure and a short sale. They both have a negative impact on your credit rating.

When you decide to attempt a short sale the bank will require you to stop all mortgage payments. This is part of the short sale approval process.

Once you stop making payments on your mortgage note the damage has started. You will begin to get slow pays on your credit report. In a real estate market like we are currently in, it takes time to sell your home. In most cases it will take at least 6 months to sell your home and in many cases longer.

Once you get a 120 day late payment for mortgage history, this is considered a foreclosure in the eyes of most banks.

Don’t get mislead by Realtors trying to make commission. A short sale will affect your credit rating just like a foreclosure.

CreditScoreQuick.com

We hear lots of chatter in regards to how collections and late payments will affect your credit scores and credit report. We don’t hear much talk about how to avoid these pitfalls of credit. I see this problem time and time again. Most credit issues can be avoided with a little financial education. I wanted to discuss how to avoid these issues. This is just a matter of sacrifice and money management. Ok, here we go…

Create a Budget

The first step is to formulate a budget. You must know where all of your money is going. Here is a “How to Budget with Excel” link. Remember not to cut out all your fun. A budget with no fun is destined to fail. Just cut out the unnecessary spending as much as possible. Discover where you can save.

Keep all your receipts on everything you spend. Once you have your budget done, make sure you give yourself cash to spend on non-essentials. That way you can get a better idea on how much money you are spending in a month. It’s much easier to see your spending habits when you have tangible money in your hand or in a envelope at home. So if you budget an extra $50.00 bucks a week on non-essentials, then give yourself $200 bucks cash and keep it in a envelope. Once your $200 bucks is gone, guess what? Your fun is done for the month.

Savings

I will be the first to admit that saving money is tough. Let’s face the facts. Spending money is much more fun that saving it. But if you don’t save you will find yourself in trouble when problems arise. Like job loss, unplanned expenses, etc…….. So put your savings on auto pilot once you have arrived at a budget.

Most Certified Planners recommend saving 10% of each paycheck. Automatically have 10% of your paycheck deducted from your checking account and forget about that money. You will need at least 6 months worth of income in your savings account. If your net income monthly is $3000, then you will need to save $18,000 in your savings account. I recommend putting those savings in an account that produces interest. Check out www.bankoholic.com for savings account rates.

Grind Stone Persistence

You need the same persistence with savings as you had when courting a girlfriend or boyfriend. Persistence always pays off. Keep your nose to the grind stone until the goal is reached. It’s ok to indulge occasionally, but remember to stay on course. Every time you go over budget you are defeating the purpose of protecting your credit.

The key to a good credit report and credit scores is having savings. This is the most essential tool for sound money management. Most families live beyond their means and don’t save enough. Stop trying to keep up with the Jones, it’s not worth it. You really don’t need a Mercedes Benz, or a BMW.  Most credit issues could have been avoided if the above mentioned was put into practice.

CreditScoreQuick.com

A divorce decree does not divorce you from your current debts. Attorneys will tell you that you are not responsible for a particular debt per a divorce decree, but what they fail to mention is that you legally are if the debt is in your name. A creditor could care less about what your divorce decree says.

After all you signed the papers with that creditor before the divorce. A credit card that is a joint account means that you and your ex-spouse are both responsible for that account until it’s paid in full. You are also responsible for any fees the credit card company charges.

Let’s assume you go along with the decree and forget about a credit card that your decree states your ex-spouse is obligated to pay. Your ex-spouse decides not to pay this creditor for some reason. Guess what will happen? There are two serious situations about to take place. The first really bad situation is your credit scores just got destroyed. Secondly you will be getting calls from either the creditor or a collection company down the road.

There is a proper way to draw up a divorce decree. The best way to go about this process is to make sure joint debts are dissolved, sold and closed. This will assure that your credit score will be protected from what an ex spouse does with joint debts.

Good Divorce Practices to protect your score:

•    Sell your house- if you have a house you bought together sell it. Make sure you sell it before the divorce is final.
•    If you have joint credit cards, pay them off and close them before divorce is final.
•    Close and pay off any type of joint loan before divorce is final

Remember that a divorce decree will not erase the debt you have acquired while married. What your spouse does with joint accounts after marriage will affect your credit score down the road. This is especially true when they don’t pay a debt on-time or charge up a debt like a joint credit card.

This issue of divorce and joint debt is ramped. It’s a major problem because attorneys don’t explain the long term affects of joint accounts after a divorce is final.

If you have found yourself in this most unfortunate situation, make sure you get all joint debts that you are not responsible for out of your name. A divorce decree does not protect your credit score.

CreditScoreQuick.com