Licensed Correspondent Lender
1545 South Belcher Road
Clearwater, FL 33764.
727.687.4762
Linda A. Kelada
Sr. Loan Specialist
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Licensed Correspondent Lender 1545 South Belcher Road Clearwater, FL 33764. 727.687.4762
Linda A. Kelada Sr. Loan Specialist
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1. Should I get pre approved before shopping for a home? Top 2. What is the difference between a pre qualification and a pre approval? 5. How is my credit score calculated? 6. How do I increase my credit score? 7. What if there is an error on my report? 8. What do lenders consider a good credit score?
Absolutely, being pre approved is critical in a competitive situation. The seller is much more likely to accept an offer from a pre-approved buyer who can close quickly, as opposed to a buyer who has only been pre qualified or who has not yet initiated contact with a lender. Getting pre approved also gives you the opportunity to learn of, and correct any credit problems you may have prior to finding a house.
Pre qualification is simply an opinion by a lender or one of their representatives (usually a loan officer) that based on information you have provided covering your income, assets, and debts, and given current market interest rates, you qualify for a loan of some specified amount. If any of the information you provide turns out to be different, or if interest rates increase, the opinion is subject to revision.
Pre approval is designed to make it easier to shop for a house and does involve a commitment by the lender to make a loan prior to the identification of a specific property. On a pre approval, unlike a pre qualification, the lender verifies the information you provide and has checked your credit.
All lenders obtain a copy of your credit report to see how timely and consistently you pay your debts. They also look at your income, the source of the income; self employed, commissioned employee, salary or hourly employee and how long you have been at your present job or the in same line of work. They will also look at the type of credit you are requesting. Is it a purchase, for a home you intend to occupy, a second or vacation home or an investment property that will produce income? Or is it a refinance, to reduce the interest rate or a cash out refinance to do home improvements or debt consolidate?
Most lenders have the capabilities to go on line and interface with both Fannie Mae via Desktop Underwriter (DU) and Freddie Mac via Loan Prospector (LP). Both are automated mortgage underwriting systems that reduce the time, cost and subjectivity associated with traditional mortgage underwriting. Their quantitative risk analysis capabilities access the level of credit risk associated with a loan, allowing lenders to quickly tailor loan terms based on an individual borrower’s risk profile.
DU and LP improve the fairness and flexibility of mortgage underwriting by using colorblind criteria in evaluating credit risk. Neither system considers factors such as age, race or gender in assessing default risk. In order to access the borrowers credit risk, these systems use factual data such as loan to value ratios, debt to income ratios and reserves. They were built to fully comply with fair lending laws.
A FICO score is a credit score, developed by Fair Isaac Company the preeminent provider of creative analytics, and is a method of determining the likelihood that credit users will pay their bills.
Fair Isaac, began its pioneering work with credit scoring in 1956 and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation.
A credit score attempts to condense a borrowers credit history into a single number. Fair Isaac and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this to be acceptable.
Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance.
Developing these models involves studying how thousands, even millions, of people have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from different sources of data. Credit-bureau models are developed from information in consumer credit-bureau reports.
Credit scores analyze a borrowers’ credit history considering numerous factors such as:
There are really three FICO scores, computed by data, provided by each of the three bureaus, Experian, Trans Union and Equifax. Some lenders use one of these three scores, while other lenders may use the middle score.
It is important to note that these three bureaus do not share information with one another and it is possible for each of them to have different data on you. Before making a major purchase, such as a home or an auto, it is wise to obtain a copy of your credit report from each one of the three bureaus and review them for accuracy. Make sure that any discrepancies are dealt with immediately. (See, What if there is an error on my report?)
While it is difficult to increase your score over the short run, here are some tips to increase your score over a period of time.
The Higher the percentage, the more weight given by the score
Notes: Severity, recency, and frequency of delinquencies noted on trade lines within the past 24 months are a primary indicator of risk. With public records as with trade lines, the older and more isolated the occurrence, the less the risk.
Changes to correct credit must be made directly to the repositories in order for the information to affect the credit score.
The consumer must write a letter of dispute to the specific repository reporting the erroneous information. The request must reference the trade line, account numbers, what is incorrect and should include photocopies of any supporting documentation; paid receipts, cancelled checks, bankruptcy discharge papers, etc. It is also suggested that you enclose a photocopy of your social security card and drivers license for verification purposes.
Under The Fair Credit Reporting Act, effective October 1, 1997, a credit repository has 5 days from the receipt of a written investigation request to contact the appropriate credit grantor about investigating the complaint(s) and receive a reply back within 30 days of the original repository notification.
Within 5 business days after the completion of the investigation, the repository must send a written report to the consumer with its findings (and a copy of the revised report if there was any change).
Phone numbers and addresses for the three repositories:
Equifax Information Service Attn: Disputes P.O. Box 740256 Atlanta, GA. 30339 800.270.3435
Experian Attn: NCAC P.O. Box 2106 Allen, TX. 75002 888.567.8688
TransUnion Corporation Attn: Disputes P.O. Box 390 Springfield, PA. 19064-0390 800.888.4213
Score of 720 or above:
Score of 660 to 719:
Score of 620 to 659:
Score of 619 or below:
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