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Credit needed for real estate mortgage financing differs from credit needed for consumer loans. If you need help getting a home mortgage, these credit tips will help you.

Contrary to what many credit advisors say, paying off credit cards each month is not always the best action to take. When making credit card payments, don’t pay the balance in full each month — let a little roll over. Carry a balance on your credit card every other month –as little as a dollar. Paying balances in full does not increase your credit score; paying balances in full may in fact lower your credit score. Accounts with zero balances do not compute significantly in your total score. For instance, a credit card with a perfect payment history and no balance will not raise your credit score as much as a credit card with a low balance. Any balance keeps the card active so it computes in your credit score.

You most likely have been advised to cut up your credit cards and close your accounts. Following this advice degrades many credit scores.

Canceling Credit Cards

Canceling credit cards can lower your credit score. Keep your longest-term credit card account open to show long-term credit history. If this account has prior late notations, negotiate with the creditor to drop negative reporting on your credit history file. Slowly close out newer accounts after they are paid off. Keep your best accounts open — those paid on time or reporting “pays as agreed” and with the longest history.

Credit card companies may raise your rate if you cancel a card before it is paid off; it is best to keep accounts with outstanding balances open until you pay them off.

Perfect Balance of Credit

1. Mortgage over one year old with all payments on time

2. Visa Card or Master Card with less than 10% of available credit as balance due

3. Discover or American Express Card with less than 10% of available credit as balance due

4. Auto loan either paid off or paid down with low payments compared to monthly income.

Debt-to-Income Ratio

Credit scores do not reflect income — credit bureaus do not have income reported to them. However, real estate lenders look at the consumer debt-to-income ratio — the amount of monthly debts in relation to the amount of earnings. Consumer debt is more highly regarded/scores higher if total debt is under 20% of net income, or total monthly payments on all debts is less than 35% of monthly gross income.

Qualifying Ratios

Lenders want the total debt ratio (the percentage of total monthly payments, including the new mortgage, to income) to be less than 33% for a typical conventional mortgage. This means the Read more…

The process of clearing credit can be laborious and frustrating. Understanding your rights empowers you and saves you time and effort. By employing the following tips, you can enlist the help of credit reporting agencies (CRAs) as you work to improve your credit rating.

A negative credit report hinders your quest for financing a house. You will have to do a lot of tedious work to clear up any mistakes in your credit report, but remember that CRAs are required by law to protect your rights. They must remove undocumented information on your report.

Once you receive your reports, you will be given a phone number to discuss your report with a real person. Your gentle manners and pleasant conversations with the credit bureau employees will motivate them to help you more than angry words. Remember, these people are just doing their job and they get yelled at day after day by frustrated consumers.

Double-D Line of Attack

Dispute Discrepancies and Document

Complete the dispute form provided with your credit report and write a letter for all discrepancies to both the creditor and the credit bureaus listing the item. Identify each error by their corresponding account number and state why it’s wrong. Include a photocopy of your credit report with the errors circled with your dispute form and letters. Send copies of your supporting documents. Keep your letters in your computer in case you need to write again.

Document, document, document

Keep copies and records of all the dispute forms, letters, and supporting documents that you send. In extreme cases this proof is used by attorneys for settlement or in court.

Credit bureaus must investigate disputes within 30 days of receiving your Read more…