With credit card and identify theft rampant, a Tri-Valley expert on credit scores and fraud has urged Realtors to encourage their clients to regularly check their credit standings.
Robert Childs of Pro Family Financial Systems told the Valley Marketing Association of Realtors that rising interest rates make it more important than ever for buyers of houses or even automobiles to have good credit.
“A typical home can cost between $180,000 and $300,000 more in interest in a 30-year mortgage with damaged or below standard credit,” Childs said. “For every 10 points that you can increase your credit score, you can save about $100 a month on a mortgage.”
Credit scores are determined by the three major credit reporting agencies: Equifax, Experian and TransUnion. Although their scoring numbers differ, a score of 720 or above is considered in the “excellent credit” range. With a 720 or above FICO score, a 30-year mortgage last year could have qualified for a 5.5 percent interest rate. With a score of 580, the borrower would have paid 8.5 percent, or 3 full percentage points more.
Childs told Realtors and mortgage lenders that their clients should check their credit scores at least 30 days before applying for a loan to make sure their credit slate is clean. That’s enough time to query the reporting agency to correct any mistakes.
“As for credit scores, only 11 percent of the country has scores of 800 or higher, and less than 1 percent top the 850 mark,” Childs said. “Most are in the 740 to 840 range, a category where there’s really no difference in the kind of interest rate you’ll be able to get. It’s those in the 600s and below that could have problems.”
One of his clients who asked for help in restoring her previously good credit had allowed her credit cards to be maxed out, Childs explained.
“She had three cards with a total bill of $10,000 and $1,000 was past due,” he said. “And she had continued to charge, adding $200 over the credit limit on one of the cards. That caused a quick 100 drop in her rating,”
Another client had 15 open credit cards in his wallet.
“Even though they were all paid off each month, and some weren’t being used, the credit agencies considered the potential as being far too great to give him a good score,” Childs said. “My recommendation is for every individual to have at least two and probably no more than four credit cards, and to pay any balance due on time.”
Lenders and credit card companies are required to report each individual’s transactions at the end of the normal billing cycle, or no longer than 30 days apart. Companies pay from 25 cents to $1.50 for each individual report they make to those agencies.
Also be careful about shifting balances from one credit card to another, a move that can lower your FICO score. New credit counts for 10 percent of an individual’s credit score, although the agencies pay most attention to payment history, amounts owed and types of credit used.
Under a recent federal ruling, each of the three credit agencies are required to provide individuals with their credit report free of charge once a year, which means these records can be checked in a rotating order three times a year. To obtain the agency’s credit score on those accounts, however, generally the applicant must pay $10 to $15. Some services offer all three reports, and the credit scores are important not just for home buyers or those purchasing vehicles. They are also checked in considering apartment applications and may affect what kinds of deposits, if any, individuals have to pay for starting telephone, electricity or natural gas services.
Childs said a combined agency report is available free of charge at www.annualcreditreport.com, although it does not report credit scores.
“Still, I go there myself almost every month to make sure there’s no questionable activity on any of my credit card accounts or that no one has obtained a fraudulent credit card using my Social Security number and name,” Childs said. “If somehow there are two or four new cards on the site that you don’t recognize, get concerned real quickly and correct the data. Otherwise, your credit status could be hurt.”
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