We
have recently been hearing about new credit scores, non-traditional
credit supplements, long term zero percent credit card offers, and
loosened qualifications for credit card approvals to consumers with
lower scores. Times are changing but what does it all mean for credit
and real estate?
It seems lenders
and creditors may be stepping over a threshold into extending
approvals on credit cards and loans with more flexible qualifications
for 2012. This month I have found a few credit card offers of 21 month
term zero percent interest rates and NO transfer fee. This is for
real if you are one of the top tiered credit score applicants.
There is also much discussion of new credit supplements full of
non-traditional credit information that may add points on scores for
those with limited history. These supplements will offer payment
history information such as, child support, rent, some utilities,
property ownership, and maybe even house values. When and if these
supplements become mainstream, they will give some consumers more
opportunity while causing score reductions for those with
delinquencies attached to the information provided.
For a fee,
bankers, realtors, and landlords will have the option to use these
supplements when making decisions about approvals. Either creditors
and lenders are looking for more extensive information on applicants
so they can approve more financing with less risk, or credit score
providers are seeking new ways to charge higher fees for information
to lenders, real estate agencies, or both. It is hard to gauge right
now what the outcome of these new behaviors will be and if it will
benefit consumers and the housing market.
The economic crisis produced a dramatic increase in defaults
causing banks to pull back the reins on qualifications for all types
of financing. This crisis forced the credit scoring industry and
atmosphere into a frenzy of competition, new score production, tons
of credit tools and offers, and thousands of fly by night companies
that promise to increase credit scores but fail to deliver. For
consumers and professionals it has been a massive overload of credit
information, including misinformation leading to a lot of confusion
and panic.
We now have the Vantage score, Fico Scores, Plus Scores, Credit Karma
Scores, Equifax Scores, and more. And while there are great credit
repair companies available to help, there are more that will allow
consumers to sign up for services online (accepting payment) without
ever speaking to the consumer or reviewing their current credit and
financial situation. Many just make promises that cannot be fulfilled
or take years to improve scores. Credit monitoring products are also
available to consumers (for protection) by credit card companies who
in many cases are the ones that have jeopardized the consumers
private information in the first place.
Should consumers have monitoring products they can use daily and pay
for monthly, buy their credit every quarter on their own, or pull
their free annualcreditreport.com reports once a year? How do
they start to prepare their credit before buying, leasing, or
refinancing a property and who can they look to for accurate
guidance?
Lots to think
about and if I were an average consumer I might just get in my car
and take a long drive after pondering the first part of this
article!
Back to the
question at hand, how does one know which way to turn and what to
choose?
Each consumer and situation is unique with varying individual
factors, from different credit scores, income, assets, goals,
desires, to the needs of the consumer. In today's economy it is of
great importance to understand that the best choice for one may be
the worst choice for another. Having the right professionals around
to guide a consumer to make the best decision could mean a successful
outcome, huge savings, or both.
For example:
John is planning
on buying a Co-op in NYC and within a few months he will begin the
process of working with a realtor. He decides to call Susan, a
realtor who was referred to him by a friend, to see if there is
anything he should be doing to prepare for their first appointment.
The realtor is happy to hear from him and they speak for a bit about
what he is looking for. The realtor asks casually how he thinks his
credit score is and if he has decided what bank he will use when
applying for a loan. John replies that he really hasn't spoken to
anyone yet and that he is pretty sure both he and his fiancé have
excellent credit.
The realtor responds by agreeing to speak again in 2 months and sets
up an appointment to look for a property. This all sounds good
when you look at it on the surface but if you delve a little deeper
there is a great missed opportunity. In today's environment
where there is much more involved in the successful outcome of a real
estate sale, agents should be giving more information and suggesting
the use of other helpful and sophisticated professionals as early on
as possible.
Here is an example of how this situation could have been handled:
Q-
Susan is there anything I should be doing before we meet in three
months to get ready for this process?
A- Yes
John, the first thing I would suggest is to order your Fico score
from myfico.com as this is the score bankers use. You will have to
pay a small fee to purchase the score but it will be well worth it to
see exactly where you stand in case something needs to be addressed
it can be done well in advance. Remember John, having the best credit
score (above a 740 Fico) may equate to saving hundreds or even
thousands monthly, which can ultimately save you hundreds of
thousands of dollars over the life of the loan so this is very
important. Ordering your credit from this site will not hurt
your score. If there is a problem, question, or if you just want more
information about credit you can visit www.northshoreadvisory.com
which is an excellent resource for credit information and help.
It is also a great
idea to speak with a banker right away to find out when you should
apply for a pre-approval letter (which can give us better leverage
when making an offer and negotiating on a property) and what kind of
documents and information will be needed for the loan application.
Here is the name of a banker that has done great things for my
clients, Bob Smith, give him a call if you would like.
The sooner you are
aware of your current situation and what will be necessary to get the
best loan, the greater your chances of success will be when we begin
the process of finding you the right property. Keep in mind you will
need a good real estate Attorney as well. If you would like a
referral let me know. Although it is my job to bring you the
best properties at the right prices for your budget, and educate you
on market value, it is also important that you have the best help and
guidance in all facets that impact the success of your purchase.
Wow! I
know John will be thrilled to get such great information and
impressed with the professionalism and service you are
offering. Separating yourself from other real estate agents as
a quality professional can only equal more sales and referrals down
the road.
Getting back to
John's situation.
Based on your recommendation John and his fiancée order their Fico
scores. The scores are both in the low 700's. Although
these are not poor scores they can be improved which will give
the couple the potential to get a better interest rate.
Although John has no delinquencies and does not need credit repair
after visiting our site he learns that if he pays down his revolving
credit balances his scores will increase.
John is thrilled that he got such good information helping him to
take the proper steps toward a better score and savings. He
calls the recommended banker and shares his score status. The banker
explains what will be needed for income qualification and suggests
John pays down the revolving credit card balances two months prior to
getting a pre-qualification letter. The banker wants to make sure the
creditors update the new balance information once John pays so there
will be no problem with the pre-qualify letter. The balance update
usually takes 30-60 days to reflect on his credit. If he had
some delinquencies on his credit profile we would have had the chance
to fix them right away.
John walks away
feeling he has really made a great choice calling the referred
realtor and tells his friend how happy he is to have been given the
referral. He feels he has made a great start to building his
future on solid footing. The realtor has solidified her relationship
with him and has a much greater chance of a successful sale and more
referrals!
Making sure credit is analyzed with future goals in mind is a MUST
before taking an action that can foil those plans and limit a
consumers options for a better quality of life.
Feel free to call us if you have any credit questions or need
feedback on a credit report.
"Great credit brings great
opportunity!!"
Copyright 2012
