My New Blog

Wow!  What a busy three weeks since I had a chance to post anything here for your financial education.

Although your credit rating is third in the order of importance when seeking a loan, (collateral and capacity to repay the loan are more essential than credit score) your FICO score is still vital to your credit pricing. 

For example, a borrower who seeks a mortgage with a 720 FICO score will have to pay, on average, over 1.75 points less than someone with a 660 FICO score for the same loan.  In many cases, a 660 FICO score will eliminate you from consideration for several loan products.

Even though we can still find programs which will accept someone with a 580 FICO score (or even lower in certain cases), the other limitations will make that borrower almost impossible lend to. 

So, what is the secret to having good credit?  First of all, pay your bills on time, every time.  Next, keep your revolving credit balances under 40% of your high limit.  And, if you need to increase your credit score, there is an often overlooked reality of Regulation E which creditors and credit reporting bureaus hate when consumers find out about it.  That is simply this, a credit reporting bureau, if challenged correctly, MUST remove any item which the creditor cannot PROVE is accurate.

The properly written dispute letter can often result in the removal of a derogatory item.  Now, be careful here, credit bureaus have learn the trick which many "fly-by-night" credit repair companies have used.  That being simply dispute everything on a report, whether it is valid or not.  Now, the bureaus are adding a line stating that an item is in dispute.  Many new creditors will not lend to you if they see this.  Face it, would you lend hundreds of thousands of dollars to someone who appears to not want to pay his bills, then tries to get around it by making you work extra to prove the debt is owed?  Of course you wouldn't, neither will most banks.  However, if there is a derogatory item which authentically should not be present on your credit report, a well written dispute, along with any written evidence you have to support your claim, can have a positive and immediate impact upon your credit scores.