Credit On Your Side

Why having the highest credit scores possible can insure great benefit after short sale, foreclosure or other damage due to the Economic Downturn:

Most consumers do not understand how credit and scores work. Even if an individual has experienced a bankruptcy, foreclosure, short sale, loan modification, or just extreme late payments on a mortgage they can still improve credit and participate in home ownership/loan approval again. There are recent types of loans that include shortened waiting periods for those who experienced these extreme credit damaging events.

To understand the total picture of improving ones credit we must look at not just the delinquent accounts, but also the value of the rest of a consumer’s credit portfolio.

For example:

Friday, I reviewed a credit report with a Fico score of 724. This report included a short sale from August 2013. Fico has published information about how short sales impact credit scores and if you started with a 780 and had a short sale with no deficiency balance your score could drop as low as a 655-675. Obviously the individual with the 724 Fico score after the short sale must have had an 840 Fico prior to the damage. Although it is very unusual to see such a high credit score it speaks to how important building the best credit scores can be even when you have a catastrophic credit problem.

This woman had many active credit accounts, old average age of credit, low balances on her credit cards, and a nice variety of installment, revolving, and mortgage accounts. The only delinquency was the short sale. With a 724 score she might qualify for loan approval within 12 months depending on why the property went to short sale. If it was due to the economic downturn and there was proof of loss of income she could qualify by working with a lender that is participating in the new “Back to Work” FHA program. With her very good credit score she would probably get the best pricing as well. Since she was so careful and diligent in managing her credit she still has a great score even with the delinquencies.