Fort Meade - USNA - Andrews AFB: November 2010

Credit Tips For My Borrowers (Stuff You NEED to Know)

It's a small world, after all.  These credit tips by my favorite Arizona lender are just as important for my Crofton home buyers as they are for Mike's Tucson home buyers.

His advice is "right on" and I have to echo his sentiment... please call me BEFORE you do anything. (Emphasis added to "before").  Wouldn't it be a shame if you paid off something and re-started the clock on a negative credit factor appearing on your credit report?

 

What affects your credit score: Mike in Tucson, Mortgage LenderCredit tips for my borrowers, by Mike in Tucson, mortgage lender

The question:  "I want to improve my credit.  Should I pay off charge-offs and collections?"

How the system works:

Take a look at that yellow piece of the credit pie on the right.  Length of credit history is 15% of your overall credit score.

Among the data tracked by the Credit Bureaus is this little gem:  "date of last activity."  It shows on your credit report as DLA.

Let's say that you've come to me for a purchase money mortgage because your agent referred you.  Let's say further that you did some dumb things six years ago when you were in college, and you know that a few derogatory accounts are going to show up from that time.

The old beater you had in college was repossessed by the car dealer whose billboard still reads "NO CREDIT?  NO PROBLEM!  The dealer sold the car at auction, and sent you a bill for the difference.  The bill was for $580.  You didn't pay it.  The car dealer sold the debt to a collection agency.

Your credit report today says "DLA 11/2004."  If you do nothing, this derogatory collection account will fall off your credit report next November, after 7 years.  That's if you do nothing.

But you're making good money now working for Raytheon as an engineer, and you think to yourself "I can pay that.  I think I'd better get that paid and off my credit report before I go see the mortgage guy..."

You get out the checkbook, call the collection company and pay the $580.

What that means to you:

  • Derogatory accounts can be reported for seven years from the date of last activity.  What would have fallen off in 2011 will now be reported until 2017.  Oops!
  • You paid a debt, and yet it's more than likely that your credit score will go down in the near term.

If, on the other hand, you pay off a collection or charge-off that is 12 to 24 months old, it's likely that your score will improve!

Takeaway:

If you're my borrower, please call me before you do anything.  Let's talk it over, and improve your chances of qualifying for that home you want to buy from your favorite agent!

____________________

I'm Mike in Tucson, your preferred Tucson Mortgage Lender.

NMLS #223495

SUNSTREET MORTGAGE llc ~ Correspondent Mortgage Bank
Offices (AZ) Mesa, Tucson, Nogales, and Albuquerque, NM.

 

This infoMargaret Wodarmation was provided to you by Margaret Woda, an Associate Broker with Long & Foster Real Estate in Crofton Maryland. Contact Margaret today for general real estate information or to learn how she can help you buy or sell a home in Annapolis, Bowie, Crofton, Davidsonville, Gambrills, and Odenton. 

Crofton real estate

HOME SEARCH          HOME BUYERS          HOME SELLERS          

 

Comment balloon 4 commentsMargaret Woda • November 24 2010 08:54AM
Credit Tips For My Borrowers (Stuff You NEED to Know)
share
It's a small world, after all. These credit tips by my favorite Arizona lender are just as important for my Crofton home buyers as they are for Mike's Tucson home buyers. His advice is "right on" and I have to echo his sentiment… more
Restaurants and Retailers Honor Veterans This Week
share
There aren't many holidays that have more meaning than Veteran's Day. Most of us know and love a veteran, and we're usually “wowed” to hear his or her stories of service. I guess that must be true of many business owners, too,… more