Friday, February 29, 2008 - Refinance Problems with 2nd Trust

If you're one of those buyers who bought with a first and second trust (and avoided Private Mortgage Insurance - or PMI - payments), you probably thought you were doing the smart thing. And just about all of us thought it was the smart thing to do.

Until one of the banks who routinely holds 2nd trusts pulled a whammy on us all.

Usually when a homeowner goes to refinance his first trust loan, the second trust hold routinely agrees to remain in second position. Position is important when a property forecloses, because the lien holder in first position gets paid first.

An article by syndicated columnist Ken Harney reports that National City Mortgage has put a halt to those routine agreements. Which means that anyone with a second trust held by National City Mortgage is going to have a hell of a time refinancing his first trust loan, regardless of who the first trust mortgage company is.

(C) Susan Pruden.

Tuesday, February 26, 2008 - The Credit Score Puzzle, Part 3

What makes up the rest of your credit score? We've already talked about payment history and outstanding credit balances.

Your credit history, which is the length of time your credit has been established, is about 15% of your score.

A borrower who has had credit lines for 20 years (we call this seasoning) scores higher than some who has never borrowed anything. If you are just beginning to establish credit, a secured credit card may be just the thing.

When I was in my 20's, I got a small personal loan and paid it off on time. By the time I was ready to buy a car, I had a history behind me and had no trouble getting a new loan. Each successfully managed loan leads to an easier time getting new loans.

If you're really new to credit, your lender may be able to show a good payment history by using phone bills, electric bills, etc.

Inquiries had a 10% impact on your score. In other words, every time you apply for credit (or even talk to a creditor about financing something), the creditor will make an inquiry as to your credit history. Too many of these and you'll lose points in your credit score. However, if you're shopping for the best rates, inquiries within a 14 day period will count as only one inquiry. So best to plan ahead when shopping for a mortgage than to spread it out over time.

Anecdotally, when I was in the mortgage business, it was common for approved loans to become unapproved loans because the buyers would go out and buy furniture on credit just before going to settlement. Those inquiries would show up and scuttle the loan. Do not spend money on anything between finding your dream house and going to settlement! Wait until the house is yours.

Last, the type of credit you have makes a difference. A mix of loan types -- auto, credit card, student, etc. -- is better than credit card debt alone.

(C) Susan Pruden.

Sunday, February 24, 2008 - The Credit Score Puzzle, Part 2

Last entry, we talked about payment history and your credit score. Your payment history makes up 35% of your credit score, so paying all your debts on time, over time, is the best way to increase your credit score.

30% of your credit score comes from your outstanding credit balances. If you are consistently maxxed out on your credit cards, you'll have a lower credit score than if you only use about 30% of your available credit. This is true even if you always pay on time -- the rationale being that you don't overly rely on credit to get by.

Maintaining a low balance shows that you can manage your credit, instead of it managing you.

Next time, the rest of the credit score puzzle.

(C) Susan Pruden.

Friday, February 22, 2008 - The Credit Score Puzzle, Part 1

Your payment history has the single largest impact on your credit score -- 35% of it. Worse yet, dealing with your payment history may seem counter-intuitive.

For instance, you may have an outstanding judgement that is several years old -- it was never paid off, but there has been no activity on the account for years. In preparation for getting a mortgage, you decide to pay off the judgement and oops! You just made your credit score worse, because now that judgement shows as a current account, not an old one.

The best thing to do is to meet with a lender before attempting to clean up your credit. Trying to do the right thing may just end up being the wrong thing when it comes to fixing your credit.

Why does your credit score matter? It is the major factor in determining your interest rate and fees. It even may determine your minimum downpayment -- both translating directly into cash needed at closing and cash spent each time you pay your mortgage.

The take-away? If you're within 3 months of getting a mortgage, don't apply for, pay off, or close any loans or credit cards without speaking to a mortgage professional first.

(C) Susan Pruden.

Thursday, February 21, 2008 - Plug for Verizon Wireless store near Ikea

If you’re a Verizon Wireless customer, you may be like me and just hate going to the Lanham store. Long waits and less than helpful customer service have driven me to locations that are just plain inconvenient to get to.

Well, they’ve just opened a new store in College Park by the Ikea and it’s the best. Their whole store is aimed at customer service. They’re quick, knowledgeable and friendly.  The manager says they are trying to change the culture of Verizon Wireless. More power to 'em!

Give ‘em a try.

(C) Susan Pruden.