Yes, there are MANY different credit scores out there. There are credit scores consumers can pull themselves through credit monitoring, mortgage scores, auto scores, and many more.
There are actually over 16 different credit "scorecards" that exist today. Each of these scorecards will reflect different credit scores. These scorecards are designed to help particular industries better gauge credit risk. The mortgage industry for example is more concerned with a consumers past mortgage history than anything else. So they weight home loan history heavier into the total score calculation than other accounts. So a consumer’s credit monitoring score might be 660. But then when they apply for a mortgage, their score might be much lower due to some past negative mortgage accounts on the report. Their mortgage score might even be higher than their consumer score, if they have past positive mortgage accounts. A credit score that a consumer pulls themselves will not be the same as their mortgage score. Their mortgage score won’t be the same as their auto score that car dealers pull either, because the auto score weighs past auto history heavier into the score makeup versus consumer scores. These different credit scorecards are designed to help specific industries better determine risk. Due to there being so many industries that offer credit, there are also just as many credit scores available. Plus, different scores are offered by different companies creating even more credit scores. FICO is the biggest provider of consumer credit scores. But now even the credit bureaus themselves are in the credit scoring game, providing their Vantage score. A Vantage score has scores as high as 990, while a FICO score can only be as high as 850. So even though a 700 FICO score reflects good consumer credit, a 700 Vantage score reflects below average personal credit. One thing is for sure; credit scores WILL be different based on who pulls the score and where the score is pulled through. Still good credit is good credit. And fundamentally any consumer who pays their bills on time and has a good long-standing credit history, including a lot of different accounts, will have a good credit score.
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That largest percentage of the credit score makeup of a consumer is from their payment history. Payment history counts for 35% of the total consumer credit score. This means how consumers pay their bills counts for more than one-third of their total score.
By law creditors have to wait 30 days to report a consumer late to the credit bureaus. After 30 days they will report the consumer late and their credit scores will go down. If they pay their bills on time, their scores go up. If they are late their scores will drop, and sometimes the scores can drop significantly. I have seen one late payment on a mortgage account lower a consumer’s mortgage score over 120 points. Late payments can have a massive impact on your client's credit score, which is why it’s so important that consumers never go more than 30 days late when paying their bills. Having lots of paid-as-agreed accounts consumers can better offset any late payments that might occur. Keep in mind that the 35% of the score that has to do with payment history, is a weights-and-balance of good versus bad payment history. The more good payments the consumer reports has the better their score will be. When paying a bill close to 30 days late, send the payment certified mail so they have confirmation of when the payment was sent. Creditors like to play games, and this evidence will help in case the creditor reports a negative mark against them, even when they did mail their payment before the 30 days passed. Remember, the biggest factor affecting consumer credit scores is payment history. Today Rep. Maxine Waters (D-CA) will introduce the Fair Credit Reporting Improvement Act of 2014. If passed, the Act would result in the most aggressive overhaul of the Fair Credit Reporting Act since 2003 and change the landscape of over 650,000,000 consumer credit reports and credit scores almost overnight. The Act would require the following take place:
Fair Credit Reporting Improvement Act of 2014 Regarding the amount of time an adverse item can remain on a credit report: All adverse real estate loans (those in foreclosure or otherwise derogatory) would have to be removed from consumer credit reports if the CFPB or FTC deemed them to be caused by deceptive lending practices.
Regarding credit scores:
Regarding credit report disputes with credit bureaus:
Regarding credit report dispute investigation standards and practices:
NOTE: Most of the above investigation standards already occur. Regarding the use of credit reports for employment screening:
Regarding the sale of services by credit bureaus to consumers:
NOTE: This appears to be in response to consumer complaints about being charged for subscriptions services by the credit bureaus after their trial or promotional free period has ended. The new FICO 09 score will become available in the fall of 2014. But just because the new model is sold online by the my fico site as well as being available to mortgage lenders, doesn’t mean it will be used by the mortgage industry. For lenders, switching to a different FICO score is a complicated risk.
Lenders who decide to try the new FICO version will go through a testing process before they decide whether to adopt them. Barry Paperno, who worked at FICO for many years, explains: “(Lenders) begin to test it on their portfolios through a process called ‘validation’ to help determine when, and if, they choose to go with the new score,” he says. “Briefly, validation consists of looking at past credit decisions and customer credit performance using both the FICO version used in the initial decision and a ‘what if’ scenario using FICO 9. If, from this analysis, it looks like FICO 9 would have done a better job of weeding out more poor performers than the score they used, the lender may decide the possible reduction in future losses will be worth the resources required to switch to FICO 9. If, on the other hand, the validation shows FICO 9 not appearing to provide any increased risk prediction value, then they’re likely to stick with what they’re currently using. Many of the large banks use their own custom proprietary scoring models in which FICO scores are just one of many components, making changes to these complex scoring systems, as would be required by a change to FICO 9, is no small logistical feat.” Lenders will be wary about having to change their whole system since the process takes time and can be quite expensive. Like most businesses, lenders have lots of priorities and the new score might not be one of them. FICO’s last version, FICO 8, was released in 2008 and has only recently been adopted by a minimal amount of lenders. To date, Fannie Mae and Freddie Mac have not adopted the 2008 version. In addition, lenders can also consider factors outside the FICO score when approving or declining a loan. The FICO 09 score has gotten a lot of press because it will place less weight on medical debt. However, a lender reviewing a credit report would still be free to question collection accounts or decline applications from consumers whose credit reports contained one or more of them. Those planning on applying for a mortgage should note that if they are ordering FICO scores from the myfico site in the fall they may have very different scores in comparison to what the lender pulls. Bankers have to be mindful that they may need to explain this to disappointed and frustrated mortgage applicants. Wrap Financing is one of many financing options available for your clients through our business funding suite. This type of financing is for business owners who want to "wrap" their vehicle with graphics.
I am sure you have more than likely seen a wrapped vehicle before, and you might even be thinking about wrapping one of your vehicles now. Wrapping a vehicle turns it into a mobile billboard. Everywhere you go your car is advertising your business. Many business owners swear by this marketing technique and insist it brings them significant amounts of business. But, most business owners don't know that they can obtain financing to wrap their vehicles or even the windows in their business. Wrapping a vehicle sometimes costs upwards of $2,500 or more. But with financing available this makes it much more affordable for business owners. The business credit and funding suite can help you secure business credit and funding through a plethora of lending options. Call us today to find out how your business can benefit from this type of advertising, or benefit from one of our other specialty programs we have available. Some Notes:
When you choose to accept credit cards as a small business, there are a number of considerations that come into play. For example, the cost of your merchant account and internet payment gateway are things that you should think about and plan for. Another often overlooked cost-factor is that of the fees associated with each type of credit card. Some merchants opt not to accept certain cards (such as Discover and American Express) because the fees for those cards tend to be higher. While a percentage point or two may not make alarms go off in your head when you think about small transactions, the fees can add up substantially over a year or two. These are costs that should definitely be considered before you decide to accept cards with higher fees. There may be other fees associated with the types of cards that are more difficult to account for. Another cost to consider when accepting credit cards is the cost of chargebacks. Chargebacks happen for a number of reasons: - Customer dissatisfaction - Consumer confusion - Poor merchant communication - Fraudulent or Unauthorized Charges (For example: a relative used their credit card without authorization) You can't always stop or remedy these reasons, but many chargebacks can be fought (and won) or avoided altogether if you are careful to cover your bases and communicate thoroughly with your clients and customers about the charges that will appear on their credit cards. Still, the cost involved in investigating and responding to charge backs, and the cost of losing them is something that should be taken into account when you decide to accept credit cards. This is especially true in businesses or industries that are more chargeback prone. (Mail order is a good example.) Imagine having the ability to access $50,000, $100,000, even $250,000 for your business.
Now imagine doing this with NO personal credit check and NO personal guarantee. Your success in business will be determined based on your business credit profile and score. With a good business credit profile you will have near unlimited borrowing power. Without having a good business credit profile it will be a difficult path to success without having access to working capital and funding. This is why almost all Fortune 500 companies use their business credit to secure funding. It's not that they need the money to operate. Successful companies use funding as leverage to grow their business. Business Credit is the best kept secret in business. Over 90% of all business owners know nothing about business credit or business credit scores. But when you do discover the power of what business credit can do for you and your business you will be floored at how easy it is to get money and grow your business. One of the many benefits of business credit is that you can obtain funding with no personal credit check. With a strong business credit profile lenders will lend you money based on your business credit, not your personal credit. This is excellent if you have personal credit issues as you can still qualify for funding. Even with exceptional personal credit, business credit gives you DOUBLE the borrowing power. You can get approved for much higher funding amounts using your business credit than you would if you used your personal credit to qualify. Another great benefit of business credit is there is no personal guarantee required for much of the funding you obtain. This means you can be approved with no personal liability. So if you ever do default, the creditor can't pursue your personal assets like your home or personal bank accounts. Business credit adds more value to your business and gives your business credibility. Stakeholders, partners, lenders, even potential buyers of your business will see more value in your business if you have a strong business credit profile built. Most important by having a good business credit profile built you have security. It is much easier to run your business when working capital is easy to come by. Any business with a $150,000 credit line available will have a much better chance of growth than if $0 was available. If you have an interest in knowing more about building a business credit line without personal guarantees please give me a call to discuss your needs. You just may qualify right now for business credit. And through the business funding suite you will be able to secure well over $100,000 in business credit within months. by Ryan Smith | Aug 08, 2014
In a move industry pros say will expand access to home ownership, FICO announced today that it is revamping the way it calculates credit scores. Under the new system, FICO will ignore paid collection accounts and place less emphasis on medical bills when calculating scores. Those consumers whose only major black marks are unpaid medical bills could see their credit scores raise by as much as 25 points, according to the company. The decision was hailed by National Association of Realtors President Steve Brown, who said it will increase consumer access to home ownership. “Realtors welcome today's announcement from Fair Isaac Corp., or FICO, that it will no longer penalize borrowers for certain debt-collection activities when calculating credit scores,” Brown said. “This move will ultimately make a real difference in the lives of millions of Americans, who have been shut out of the housing market or forced to pay higher mortgage interest rates because of flawed credit scores. Since the housing crash, overly restrictive lending has been the greatest obstacle to homeownership. NAR will continue to support efforts to broaden access to credit for qualified homebuyers.” The new FICO scores will be available to lenders in the fall, according to the company. The 5 Cs of business credit are:
1. Character 2. Capital 3. Capacity 4. Collateral 5. Conditions Character is all about you. It's about your personal history, your stability, and how reliable you are. This variable is more subjective than the others, and is one of several reasons it is beneficial to do business with a bank where you have built relationships with the people who work there. In determining your character, the lender may look at your education, your work history, your personal income, and personal credit history. Again, it's important to remember that this is one area of business credit where relationships do matter! Capital is about how much you have invested in your business. Whether you are seeking a bank loan or a loan from a private investor, the lender will want to see that you are heavily invested in your own business. Generally speaking, the more of your personal money that you've invested in your business, the better it will look to a potential lender. (After all, if you're not confident enough to invest in your business, why should they be?) Capacity is about your ability to repay a loan according to the terms. Things like cash flow, payment history, and the assets and resources of any person providing a personal guarantee will play a part in determining your capacity to pay back a loan. Collateral is something offered up as security for a loan. Anything from equipment to inventory to a home you own can be considered collateral. It may be easier to get approved for loans with collateral, and many loans will require it. In some cases, the more that you can offer as collateral, the more likely you will be to get approved. "Conditions" may mean any number of things, some of which could be out of your control. The current economy, for instance, may play a role in your ability to get approved for a loan. Other things that they may look at include your industry and its economical status, and the purpose of the loan. If your industry is suffering and businesses in your industry are struggling, it could negatively affect your ability to get approved. Some loan purposes are more readily approved than others, too. Loans for riskier purposes such as new and unproven expansions are generally less likely to be approved. Realtors help your investors purchase more properties.
Your clients can enjoy a quick closing with rehabilitation loans. Rehab loans are tailored for the real estate investor who wants to purchase and rehab investment property. Using the property as collateral, funds are available for short-term residential renovation projects that most traditional banks and credit unions won’t approve. Authorized monies will be held in escrow and released in draws, as your contractors complete renovations. Experienced real estate “flippers”can be approved for up to 100% of the project costs with House Rehab Financing. The property can be used as collateral and the investor can be approved for a loan up to 65% of the home’s value. The loan typically offers a loan term of about 6 months, and a low interest rate commonly under 9%. And, there is no pre-payment penalty if the loan is paid off early. This makes it easy to quickly sell the rehabilitated property once repairs are complete. Only non-owner occupied properties can qualify for our house rehab financing. Financing can be obtained for residential 1-4 unit properties, and even small apartments and condo conversions by exception. All house rehab financing loans range from $25,000 and higher. 100% of renovation funds are typically advanced in 1 to 4 draws. Once the inspector certifies work is done, funds are wired within 24 hours directly to investor's account. House Rehab Financing is one of many financing programs available for you and your clients through the Business Finance Suite. |
Dan GarciaTrevana Properties is a placement company working with a variety of hedge funds, REIT's, commercial banks, specialty boutique lenders, private investors and other funding sources not widely known to the general public. Archives
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