Mortgage lenders are permitted by law to review your credit report. Keep in mind that each lender will also have their own underwriting guidelines they follow. Those guidelines will determine your eligibility.

What the heck are underwriting guidelines? Underwriting guidelines are the criteria under which you will be approved for a loan. Insurance companies use the same term, when they evaluate you for insurance. Underwriting guidelines assess the risk you pose to the company. In the case of a mortgage the lender is trying to decide what the chances are that you will default.

What does this mean for you? If you have bad credit, you need to find a lender that has easier underwriting guidelines. The challenge is that most lenders, who accept a greater degree of risk in their loans, also charge a higher interest rate. So, if your credit is bad you will pay more.

The good news is that if you can establish a good payment history on your mortgage it will help your credit score to go up. Perhaps, when it's time to re-negotiate your mortgage you will have a better credit score and will qualify for a better interest rate.

Posted by TheBlogMachine.com at 12:53 PM EDT

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Predatory lending practices take advantage of consumers. The intent is to defraud you, the consumer, of your valuable equity in your home, one way or the other.

What exactly are predatory lending practices? Well, the Department of Housing and Urban Development (HUD) lists 11 things you can do to protect yourself:

1. Get educated! Before buying, attend a home ownership education course offered by HUD-approved non-profit agencies.
2. Shop around when selecting a real estate professional. Interview several real estate agents before you sign up with one. Get references. Check them.
3. Be informed! Get information about the prices of homes in the neighborhood where you want to buy. That way, no one can get you to pay too much.
4. Protect yourself! Always have a new property inspected by a properly qualified and licensed home inspector as a condition of sale. Don't buy without this inspection, unless you are willing to assume the risk. If the home inspector finds problems, negotiate up front who is going to pay for repairs. If it ends up being you, be sure you can afford repairs on top of the cost of the property.
5. Shop around when selecting a lender! Compare costs, and especially those fees that are listed in the fine print. Be suspicious of anyone who is pushing you towards one lender and one lender only.
6. Tell the truth on any loan application! Do not be convinced to lie about your income, your down payment source, your debts or their amounts or how long you have been employed. All this information should be perfectly accurate to your knowledge. Lying on a mortgage application is a fraud. It leaves you open to being blackmailed.
7. Never borrow more than you can afford! If you can't afford to repay a higher loan amount, you risk losing your home and all of the equity you put into the property. Do not be convinced to take extra on your mortgage if that is not in your best interests.
8. Do NOT sign any blank document. All documents that you sign should be fully completed with all fields filled in; otherwise, if information is filled in after you have signed, you may still be bound by the completed terms. If you find a blank, either print in "N/A" or put a stroke through the blank so that it is obvious that it is intentionally blank.
9. Read everything! Don't sign anything you don't understand. Ideally, you would have a lawyer review any and all documents before signing, but even a trusted real estate professional can be a great help. If you don't have a lawyer, you can also ask for help from a housing counselor with a HUD-approved agency. One of the favorite practices of predatory lending is to charge fees for unnecessary or non-existent products and services.
10. Be suspicious of suspicious dealings! If the cost of a home improvement goes up if you don't accept the contractor's financing, then something isn't right.
11. Be honest yourself! Are you buying the property to rent? State that up front. Do not say that you will occupy the home if that is not your intention.

Where can you go for help if you've been victimized? Since the spring of 1999, HUD has been actively involved in combating predatory lending through research, regulation, consumer education and enforcement actions against lenders, appraisers, real estate brokers, and other companies and individuals that have victimized home buyers. You can check their website for more information, as well as links to other resources.

Not only has HUD become involved, but there are also a number of federal organizations in the US that will help you if you think you have become the victim of predatory lending practices. Many states have local support for you, if you have a problem of this nature. You can find these organizations through the HUD website as well, or by searching your local state government site.

What if your lender is threatening you with foreclosure or other penalties? There are also housing counseling agencies that can help you, especially if the predatory lending practices are resulting in a threatened foreclosure.

Posted by TheBlogMachine.com at 12:25 PM EDT

Updated: Friday, 2 June 2006 1:09 PM EDT

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Whenever you authorize a mortgage lender, creditor, employer or other business to check your credit report an "inquiry" is added to your report. An inquiry notes that someone has checked your credit. An inquiry usually stays on your credit report for two years.

While an inquiry by someone else will be noted; checking your own credit report is not.

A lender will look at the number of inquiries and when they took place. A large number of inquiries occurring in a short period may be interpreted as a sign that you are either:

• Applying for lots of credit because of financial difficulty, or Overextending yourself by taking on more debt than you can actually repay.

Therefore, it's always a good idea to minimize inquiries into your credit report. If you're shopping around for mortgage lenders who do bad credit mortgages, don't let every lender you consider run a credit check. Get a copy of your own credit report. This way you can provide the report directly to the lender, especially for quotes. Alternatively, you might have to settle for slightly more approximate estimates while you are shopping around, if the lender doesn't verify your credit history. However, be sure to explain to any lender what bad credit is on your report. That way, they can give you an accurate estimate. This is important. You'll need to know ahead of buying that property whether you can get a mortgage or not and from whom.

Posted by TheBlogMachine.com at 12:24 PM EDT

Updated: Friday, 2 June 2006 1:09 PM EDT

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Once you feel all the information obtained within your credit report is accurate there are several things you can do to improve your credit report and credit scores.

If you have a low credit score, only because you haven't had any credit, apply for credit with a local business; such as a department store or a local bank or credit union. These local merchants may have lower credit standards than larger lenders. Then, make use of that credit being sure to pay promptly. You can avoid any interest charges when using credit cards by paying before the due date on your bill.

If you are having difficulty opening a credit account of any kind, consider asking a friend or family member to co-sign your loan or credit card application. You may also be able to get a secured card, which you guarantee by a deposit you make with the card issuer.

Always pay your bills on time. This is one of the best ways to get credit and improve credit. Lenders see a history of on-time payments as indicator of good credit risk.

But that doesn't mean your credit history must be perfect for you to qualify for a mortgage home loan. Bad credit because of late payments can be changed over time. Your best bet is to pay all bills on time.

Let's say that you misplace a bill this month from your electricity company and you realize your payment will be late. You decide to wait until next month and just pay both months at once. Don't!

You do not want any payments to arrive over 30 days past the due date as this will be reported to the credit bureaus. Also, the later the payment arrives the more damage can be done. Most companies will also report late payments as 60, 90 and 120 days late. So, if you happen to miss a payment make sure to send it in right away.

Another factor any mortgage lender must assess before offering you a mortgage approval is your total debt. If a large portion of your income each month is already committed to paying off other debt you'll have a hard time getting that mortgage. The amount of your monthly debt payments compared to your income is referred to as your debt to income ratio.

As a rule of thumb, non-mortgage debt payments should not exceed 10-15% of your take home pay each month.

If you have bad credit due to too much debt, one option is consolidate your other debt as part of your mortgage. In effect, you will get enough cash to pay off the other debt as well as pay for your home.

Oftentimes, you can drastically lower your monthly payments in this way. It also leaves you with just one monthly debt payment rather than several. With one payment, it's easier to track and be sure that payment is on time. It's one way to increase your credit rating and credit scores, while also making your financial situation easier.

Posted by TheBlogMachine.com at 12:23 PM EDT

Updated: Friday, 2 June 2006 1:09 PM EDT

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Bad credit is a big factor in any lender's mortgage process. In fact, some lenders will not even consider someone who has bad credit. So, your credit history and credit score are critical to you getting a loan and getting a lower interest rate.

What's a credit score? The most common credit score is the FICO score. A FICO score of 620 or less indicates bad credit. What a FICO score or any other credit score do is rank you and your credit history against a scale. The higher your credit score, the better credit history you have overall.

Fundamentally, your credit score combined with your credit history help mortgage lenders decide how much credit to give you and what interest rate you qualify for. So, the better your credit history, and the higher your credit score, the more likely you are to qualify for the lowest interest rates and best mortgage options.

How did your credit get bad? Well, if you have never had credit it may be bad because you have no payment history. That's easy to fix. On the other hand, you may have a bad credit score because of your bad payment history. While this can also be fixed, it will take longer.

How did you end up with a bad payment history? It's actually pretty easy. Many organizations report to credit bureaus every time you miss a payment. So, if you've been late with your phone bill or electricity bill or gas bill it's likely on your record. Each time this happens, it will lower your credit score.

Who reports late payments? Any organization that is collecting payments can potentially report late payments. Some organizations don't report a late payment unless there is a 'history' of problem. But you cannot rely on that.

If you have bad credit, you need to understand exactly how bad it is. Your first step is to obtain a "tri-merged credit report", which will also contain your credit scores.

What the heck is a "tri-merged credit report"? A "tri-merged credit report" is a complete credit report, with as much history as has been reported on you. This information is kept by credit reporting agencies.

There are 3 main credit-reporting agencies used by the mortgage industry. They are Equifax, Trans Union and Experian. These credit agencies or bureaus will pull from their files a credit report for a lender when a credit check is requested. The tri-merged credit report is a compilation of the information received from all three agencies.

Posted by TheBlogMachine.com at 12:22 PM EDT

Updated: Friday, 2 June 2006 1:10 PM EDT

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A credit risk score is a statistical summary of the information contained in an individual's credit report.

The most well known type of credit risk score is the Fair Isaac or FICO score. This score is not just your average ranking device. Sophisticated mathematical processes calculate the score by assigning numerical values to various pieces of information in your credit report.

The score itself is relative. Some lenders will consider a particular score acceptable, and others will not. Lenders will view scores differently, depending on many factors, including the marketing goals and mortgage underwriting guidelines for that lender.

Not all lenders will work with 'higher risk' clients.

There is good news though. Your risk score will change over time as your credit history develops. And you can affect that score by improving your performance with credit. Paying regularly and on time is an excellent start.

Note that FICO scores range from 375- 900. The higher the score the better the credit rating. Usually any credit score under 620 is considered bad credit. What that means is that you may not qualify for a 'conforming' mortgage. But that doesn't mean that you won't qualify for a mortgage at all. Other lenders may be willing to consider your business.

Although it may take time, your goal should always be to continuously work towards obtaining a higher credit score.

Posted by TheBlogMachine.com at 12:17 PM EDT

Updated: Friday, 2 June 2006 1:11 PM EDT

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A credit bureau is also called a credit-reporting agency. A credit bureau is in the business of gathering, maintaining and selling information about consumers' credit histories. It's all they do.

A credit bureau will collect information about your payment habits from all kinds of sources. The credit bureau stores this information in a computer database. Then, it sells this information to companies and lenders in the form of credit reports.

When you apply for a mortgage, the lender will order your credit report from at least one credit bureau, but usually all three. The lender does this in case one credit bureau had something reported to it and it wasn't reported to the other bureaus. The tri-merged report is the result of merging the three credit reports from the three bureaus.

Note that the credit bureau charges the mortgage lender a fee for every credit report requested. This is how the credit bureau makes money.

No credit-reporting agency will recommend whether or not to give you a home loan. It is up to the mortgage lender to evaluate your credit report and then decide whether or not to offer you credit. The three leading credit reporting agencies in the US are: Experian, Equifax and Trans Union

Posted by TheBlogMachine.com at 12:15 PM EDT

Updated: Friday, 2 June 2006 1:12 PM EDT

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What exactly is in your credit report? It generally contains four types of information:

1. 1. Identifying information:
   Your name
   Your current and previous addresses
   Your Social Security number
   Your year of birth
   Your current and previous employers
   If you're married, your spouse's name
2. Good and bad credit information, which includes credit accounts or loans you have with:
   Banks
   Retailers
   Credit card issuers
   Mortgage lenders
   Other lenders
3. Public record information such as any information that's contained in state and county court records, like:
   Bankruptcies
   Tax liens
   Monetary judgments
4. Your credit report will also show that you have applied for new credit that could result in additional debt. This is why you should limit the number of credit inquiries made on you. A lender will view multiple recent inquiries as a sign that you are overextending yourself.

Once you get your credit report, read it carefully! If there are any problems or inaccuracies, contact the credit bureau right away. Do this in writing. Also, if the same problem is reported by more than one credit bureau you need to contact each one.

If a bad credit incident is reported inaccurately get it removed. This is very important.

To dispute inaccurate information on your Experian, Trans Union or Equifax credit report write to the bureau that supplied the information. In your letter be sure to include:

• Your full name, first, middle and last and include any applicable suffixes (Jr., Sr., II, etc.)
• Your complete mailing address
• Your date of birth
• Your Social Security number (this is necessary to access your credit report)
• The name and account number of the creditor and item in question
• The specific reason for your disagreement with the disputed item
• Request an updated credit report
• Your signature

Posted by TheBlogMachine.com at 12:08 PM EDT

Updated: Friday, 2 June 2006 1:12 PM EDT

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While you might be in a tough spot, with financial woes and credit agencies at your heels, there is light at the end of the tunnel. And it might just come in the form of a bad credit mortgage.

Or, you might have "bad credit" because you just haven't had any credit in the past. If you've never had a loan or a credit card you will have a low credit score. A bad credit mortgage might also be for you.

What's a bad credit mortgage? It's a chance to establish credit if you don't have any and can't wait. It's a second chance if you have already had credit and done a bad job. If you already own a home it can also be about refinancing.

Regardless of why you are in this situation, if you have bad credit you will need to find a mortgage lender that will work with you. That lender will understand that bad credit can happen and often there is a good explanation. You can check your credit score online

In effect, a bad credit mortgage can give you the opportunity to:

• Establish or clean up your credit
• Get some relief from high interest debt
• Consolidate existing bills into one monthly payment
• Get relief from current creditors by paying them off
• Get extra cash for extensive home repairs, or emergencies
• Leverage you out of a possible bankruptcy

Posted by TheBlogMachine.com at 11:07 AM EDT

Updated: Friday, 2 June 2006 1:13 PM EDT

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