Saturday, April 16, 2005

Improving Credit Score

Quote of the Day:

A smooth sea never made a skilled mariner.
- An Englist Proverb

Dear Readers,
Recently I received an e-mail from a past client that moved to another state and for whom I sold their house. Other than the typical chit chat, they wanted to know how to improve their credit score, which had dropped significantly since their move. They thought that since they missed their last mortgage payment, this was the culprit. Here is my take on what happened.

The proceeds from the sale of your home in Wenatchee paid your mortgage off in full before the past due date. Unless you missed the previous month's payment, there should be no negative effect on your credit score. If you were over 30 days late with a payment, it will show up on your credit report. Missing the due date does not automatically show up on your report. It is being 30 days late (or beyond) that causes problems.

But... I believe there are a number of factors working against you right now, none of which have to do with anything you did wrong. You both moved recently AND switched jobs. The longer you live in one place AND work at the same job, the better your "stability" rating, which is factored into your overall credit score. Also, when you move, did you use credit cards to cover the costs of relocating until you got settled? Are you still carrying some high balances? Having open credit accounts is fine, but it is not good to have the balances too high. You want to keep the balances well below the credit limit.

As I said, I believe there are several factors involved and it's just going to be a matter of time before the score adjusts back up where it belongs. This upward adjustment will take place over the next several months and should be totally corrected within 12-24 months.

In the meantime, if you are being denied credit for any reason, you are entitled to a free credit report. When you receive the credit report, have an expert (someone at the credit agency or a qualified mortgage lender) read it and explain what you can do to improve your score. If there is any erroneous information on the report, you can appeal it and get it removed. If you want specific information about the actual process to get negative items removed from your credit report, let me know. I will refer you to someone who is more of an expert in that field.

I suspect your score hasn't gone down enough for you to be refused credit. You just may not qualify for the best interest rates until the score improves. In the meantime, enjoy your new home. We miss you here! Good luck!

Yours for success,

Realtor, ABR, e-PRO, GRI, REI
Serving all of Washington State...
Specializing in Wenatchee & surrounding areas

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