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My Credit Score?

by Michael P.
(Wildwood, NJ)

I was told I do not have a credit score, what does that mean and what should I do about it?

=====ANSWER=====

Dear Michael,

Thank you very much for your patience and asking a question here at my website. I hope you find this information below helpful.

Establishing a good credit history is important in today's society. If we want to buy a house, then it's especially true.

So I guess the question is how can you do so? Well it is a process and takes time.

First you may need to think about applying for a secured credit card. Get a small limit on it say like $300-$500. Use it each month and pay off the entire balance.

Also, you would be wise to have a bank account if you do not have one that is connected to this secured card.

These cards require a security deposit equal to the limit on the card. So if you wanted a limit of $300 then it would require a $300 deposit etc.

As you build credit over several months using this secured card, then you might purchase some small necessary item at a store that issues credit cards. Again, it must be useful and not just to let us go crazy spending money.

Then pay this over time, say 6 months or so. This will help build a good credit history.

Please keep in mind there are alternative forms of credit a lender can use also. I have a page on this site meeting with a mortgage professional that you may find helpful in this regard.

So don't get in a hurry, it does take time to build a credit history. Visit the links above for more information.

Also, please help me spread the word about this FREE source of information for first time home buyers by telling your friends and visiting my sponsors.

Kind Regards,

Jeff Ragan

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1st Time Home Buyer - Turned Down Due to Not Enough Debt History

by Teresa
(Fargo, ND)

My daughter lives in Fargo, ND and was pre-qualified for a loan and was scheduled to close this Friday. She is a college graduate, has a great credit score and stable job. She gave her notice to her landlord and today - 2 days before her closing she was told there was an error and they were denying her loan due to not enough debt history. Now she is without an apartment in 2 days and apparently a home - what is her recourse?

=====ANSWER=====

Hello Teresa,

Thank you so much for visiting my website and asking such a good question.

As I think over your question, something is just not right here. What kind of a loan was it that she was approved for? Was it a conventional loan? If so, then the lender got nervous, perhaps you're dealing with a local bank or credit union.

She is entitled to a written letter according to RESPA law which should state the exact reason for her denial. Also she should be able to get a FREE credit report.

OK, with that said, I would strongly suggest she notify her landlord of course and see if she can stay longer. Then I would look real hard at the FHA loan. I have a page hear called Best FHA Home Loans you may want to check out. That page even has a link to Lendingtree if she wants to give them a try for a mortgage.

The FHA loan has very little requirements. Basically a credit score of 620 or better, 2 years on employment and a DTI of 29/42. For additional details on your debt to income (DTI) take a look at my First Time Home Buyer Checklist page.

To sum it up, your daughter should not be denied a loan if she can meet the FHA guidelines. This is the simplest way to get a home mortgage today for first time home buyers.

I hope things work out. If you find this helpful, please share this by using your FaceBook and Twitter account to pay it forward and help someone else by using the links below.

Best Regards,

Jeff Ragan
The Mortgage Doctor


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Only One Credit Report Score

by Dawn

Recently I went to my bank to inquire about a home loan. After running my credit report, they said only 1 number registered. My score is 775. I have 2 car loans that have been payed off and a credit card that I have had over 10 years that I pay off every month.

Why would only 1 number register? The agent suggested that I open 2 more credit cards, but I'm not sure if that is the best thing for me to do. He also said that it would take at least 60 days for the new accounts to register. What should I do?

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ANSWER
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Dawn,

I have seen this happen before. You have a great score and obviously watch your credit carefully.

Unfortunately, the credit reporting agencies need to see at least 3 trade lines of credit to report anything. These can be either revolving, installment or a mortgage. Otherwise they cannot calculate a score if there isn't enough credit information to figure that score.

Since you have most everything paid for, two of the credit reporting agencies do not have anything to report. That is why your agent suggested you open (and of course use) two more credit cards so this activity can be reported. Your agent is correct in saying that it will take 60 days for the reporting agencies to score this new activity.

However, if you use FHA loans, they will consider alternative forms of credit such as your utility bills, mobile phone bills, car insurance or rent payments. They will use these along with your one score to qualify you for a mortgage. Conventional mortgages require the 3 scores to qualify you for a mortgage.

Of course, I would recommend FHA but that is up to you.

Hopefully this helps,

Jeff









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