Realtor Diane Bell's Hilton Head and Bluffton Real Estate Blog

One of the most misunderstood areas of a credit score is the "balances" part of scoring.  I say that it is misunderstood not because it is complicated, but because people tend to have no idea why their credit score is low, when in fact they are carrying very high balances on their credit lines, a common factor in a low credit score.

I've seen credit reports where people were never late on a payment, yet their scores were in the 580's.  That isn't exactly a score to get excited about.  The credit scoring model views such a person as a higher risk, and grades them accordingly.

Your balance-to-credit limit ratio makes up 30% of your credit score, only second to that of payment history. Here is an example to understand how your balance is calculated: You have a $1,000 limit on your VISA card, and your current balance is $500, so you are at a 50% ratio.  The higher your balance is to the limit, the more it affects your credit score. It is even possible to go above your credit limit, which can really hurt your credit score. 

PRICELESS TIP ... Assuming you have two credit cards with a $10,000 limit for each card; It is better to have a $10,000 balance divied up between twoo credit cards, having a $5,000 balance each, then it is to have the same $10,000 in debt on one credit card (leaving the other card with a $0 balance). Use this system to maximize your credit score.     

CAN WE FIX IT?

 YES WE CAN! - Some fix-its for some common problems.

 

You can transfer balances from one card to another to "balance out" your debt ratio per card.  Depending on the scenario, this could improve a score by 50+ points. 

On occasion, a creditor will not report your credit limit.  Therefore whenever you have any balance on that account, your score is calculated as having credit accounts over the credit limit, negatively impacting your credit score.  What can you do to remedy?  Ask for your creditor to report your limit to the credit bureaus. This should usually work.  Another option is to max out your card and immediately pay it off.  When you do this your credit limit will be reported at the dollar amount you just used your credit card up to, and your balance ratio will then be accurate. If utilized this second way, your "new limit" should show for about 13 months.  NOTE: Do not max out your card if you do not have the money to immediately pay it off.  This will do far more harm than good. 

Ask for a credit limit increase every 6 months.  If you have paid your accounts on time, and a creditor hasn't automatically raised your credit limit, you can call and ask that they do so.  Sometimes they will automatically do it, and sometimes they will say that they have to pull your credit.  I would suggest you don't have them pull your credit, as it would hurt your score. 

Doing a balance transfer to a business credit card that is not reported on your personal credit profile is one way to raise their score.  Often business credit is not on one's personal credit profile. 

This article is number 3 in a series of 6.  Don't miss the other important factors in the credit scoring model, including many other ways to inrease your credit score.

Many scenarios are delicate and very specific action should be taken.  Incorrect action can have a negative affect on your score. Contact me directly to discuss your options and next action steps to improve your score or to qualify for your new loan.  ~  Steve Kappre

 

Credit Scoring - What Makes Up My Credit Score? (1 of 6)

Credit Scoring - Payment History (2 of 6)

Credit Scoring – Balances (3 of 6)

Credit Scoring - History (4 of 6)

 

 

The most important factor regarding your credit score is your payment history.  Your ability to pay your accounts on time reflects 35% of your credit scores.  The credit scoring model certainly wants to know that you are paying your accounts as agreed.  The last 6 months are the most important time frame.  As time goes on older accounts and reportings have less weight to your score.  Although many factors come into play, a very recent hit to your credit could drop a score 50+ points

A credit report will usually show at minimum these catagories; 

• Past Due
• 30-days late
• 60-days late
• 90-days late
• Collections
• Public Records, such as Judgments, Bankruptcy, Tax liens

Past due accounts are accounts that are 1 day past due.  They will negatively affect your credit score while the account shows "past due".  If the account reports as paid before hitting the 30-day mark, then the past due amount will not show past due, and you won't have a long term credit hit as you would for a 30+ day late.

Credit reports have no "memory".  It is snapshot of what appears at the time the report is requested. 

30-day lates and greater are more permanent dings to your credit score. The worse the late period the more damage it does to your score.  For example, a 90-day late is worse than a 30-day late.  Accounts that go beyond 90+ days may eventually show up as collections or judgments.

Collections are among the worst for a credit score.  If you are looking to maximize your credit score, here is a rule of thumb.  Collections less than 2 years old pay off, as it should benefit your credit score.  Collections 2 years or older,  leave alone until you can pay them off at settlement (assuming you are buying a home).  Very Important - paying a collection over 2 years old will negatively hurt your credit score.  Essentially what happens is the account is brought to a current status, and as stated above, the more current the derrogatory mark, the more it hurts your score. In all cases, be certain to obtain proof of the account's pay-off in case it is needed in the future.

A few more notes regarding payment history ...

The highest weight is attributed to the highest pay account.  For example, a 30-day late on a mortgage for $2,000/month is worse for your credit score than a 30-day late on a JC Penney card for $10/month.  

Judgements, bankruptices, and tax liens do not keep you from purchasing a home.  Even someone in a bankruptcy chapter 13 can, with permission from the trustee, obtain a home mortgage.  For more information regarding judgments, bankruptcies, tax liens, and anything else regarding credit just call or e-mail me.  I have great respect for people who take the time to restore their credit, and I will do my best to help.  And if you are working hard to make it better, work equally hard to make sure you are doing it RIGHT! ~ Steve Kappre

If you missed the other installments on credit check out "Credit Scoring -What Makes Up My Credit Score?"

 Credit Scoring - What Makes Up My Credit Score? (1 of 6)

Credit Scoring – Payment History (2 of 6)

Credit Scoring - Balances (3 of 6)

Credit Scoring - History (4 of 6)

I've worked with clients all across the board.  Some who had "perfect" credit, and some who upon seeing their credit report, found themselves a second job (fixing their credit).  I'll help you understand what makes up a great credit score, and how to alter any situation to improve the credit scores.

Let's lay some ground-work. 

Three bureaus evaluate your credit scores

1. Equifax
2. Trans Union
3. Experian

Credit scores will be different among the three bureaus because not all creditors report your data to all three bureaus.  Even if your data was reported exactly the same to each, the three credit bureaus don't use the same model to evaluate your score.  Typically your three scores range within 50-60 points from high to low.  On some occasions you will see a score drastically higher or lower than the other two.  For this reason, many creditors will pull all three scores and use your middle score for qualifying purposes. The middle score is assumed throughout these articles when we talk about one's credit score

Credit scores range from 350 - 850.  The higher the score the better.  What is a great credit score?  In today's market you want to have a 720 or better.  Even higher is better for qualifying purposes, although it probably won't get you a better rate.

"Good" Credit Scores.  You can still finance a home with a lower score, but it becomes more expensive either by way of a higher interest rate, or by way of higher fees (usually points*).  Stepping down from that 720 score, you will experience what is call Risked Base Pricing.  Each 20 points lower could cost you in rate or fees. Today Fannie Mae, Freddie Mac, and FHA all have some form of risked base pricing.  So literally one point in your credit score could be a huge savings to you.

"Poor" or Low Credit Scores.  Your options shrink real fast as you dip below 580.  Although many mortgage guidelines allow for scores below 580, many lenders/investors (as of this writing, 10/22/08) incorporate their own guidelines on top of these main guidelines. So in some instances, going to another lender that offers the same type of loan, for instance an FHA loan, may allow you to finance your purchase or refinance instead of being denied.

Now that we have a basic knowledge of credit scoring, look out for the next part of this series, Credit Scoring - Payment History (2 of 6) where we will start to talk about the reasons scores are what they are, and how to get your credit score higher and keep it there.

For questions or a personal credit review, contact Steve Kappre at  856.419.3561 or at www.stevekappre.com

* A point is equal to 1% of the loan amount. i.e. One point on a $100,000 loan is $1,000. 

Credit Scoring – What Makes Up My Credit Score? (1 of 6)

Credit Scoring – Payment History (2 of 6)

Credit Scoring – Balances (3 of 6)

Credit Scoring – History (4 of 6)

 

I'm sharing this great testimonial that I recieved last night because I know many people are in the same boat. The questions regarding credit scores are numerous, varied, and frankly getting them answered correctly makes a HUGE deal regarding many other areas in life.  Maybe you can find the same helpful information below in the credit score links.

"I am very grateful to you for taking the time to help me (fix my credit) even though I am doing the work. The fact that you have laid out the steps for me to follow is the best thing that anyone has ever done for me. It is easier to understand now what I need to do to get to where I need to be. Before reading this and talking to you, all I honestly knew was that as long as I paid my bills on time and got them under the limits my score would go up. Having the whole equation makes it so much easier. Thanks again!" - H.S.

I couldn't have said it better!

If you need some questions answered regarding your credit score, spend a little time reading these articles below. They should shed some light on just about anything you want to know.  And if you still have questions, just call, text, or e-mail me.

 

Credit Scoring – What Makes Up My Credit Score? (1 of 6)

Credit Scoring – Payment History (2 of 6)

Credit Scoring – Balances (3 of 6)

Credit Scoring – History (4 of 6)

Credit Scoring – Mix of Accounts (5 of 6)

Credit Scoring - Inquiries (6 of 6)

How can we become Greener?

There are several different levels on the route of becoming greener.

They start with the simple things we can do every day to become greener.

This is not a definitive guide to all things green, it's more a thought provoking list to inspire you to think about and make little changes. These can help the environment and your bank balance.

Step 1 - Easy as changing a light bulb!

• Change your light bulbs for compact florescent light bulbs ones. These use 75% less energy and last up to 10 times longer than incandescent bulbs.
• Turn lights out in rooms when you leave and turn it back on when you come back in.
• Save water, don't run facets longer than you have too.
• Recycle as much as you can. Think about a composter for the garden. Instead of sending your green scraps to the landfill you can easily make your own compost for your garden.
• Use re-useable bags available at the grocery stores rather than disposable plastic ones that you throw away.
• Check around your doors and windows for drafts. This can be easily done using a hairdryer and a candle or just a candle on a windy day. Repair any gaps by caulking them up or installing draft excluding strips.
• Turn down the thermometer on the heating/cooling system. One degree can equate to up to  a 5% reduction in your heating bill.
• unplug any chargers used for phones, mp3 players, etc when they are not being used. Saves electricity and removers a potential fire hazard.
• Don't use a screen saver on your computer, turn your monitor off.
• Turn off computers, televisions, etc when not in use rather than them being on stand by. This could add up to a 5 - 8 % reduction in the electricity you use.
• Only use the dishwasher/washing machine when full.
• Do the washing up by hand if it's only a few items.
• Dry clothes out doors (where practical) rather than using the dryer.
• Buy products that are made of recycled material or are recyclable when used or that the packaging is recyclable over other comparable products.
• When you have finished with something, can it be sold or given away rather than just putting it in the trash. You can sell just about anything using the likes of Ebay.com, craigslist.com or your local web sales sites like Yahoo group lemonade-stand here in Charleston, SC. Most of these are free or at a low cost. Consider taking stuff to your local Goodwill store.
• Lower the temperature on your water heater to a 120 deg F. It's safer if you have children and is nromally still hot enough. (Check that your dishwasher has a booster heater if it requires hot water at 140 deg F for optimal cleaning).
• Take a shower instead of a bath.
• Install water saving shower heads can reduce the water you use from 3.5 - 5.5 gallon per minute down to 2.2 - 2.5 gallon per minute. Saves water and saves heating water.

Step 2 - A little more effort!

• Car share/pool for your trip to work or to collect the kids from school.
• Walk or take the bicycle to the neighborhood pool or shops instead of your car.
• Collect rainwater for use in watering the garden.
• Add motion detectors to outside security lighting or replace with solar lighting with motion detectors.
• Check and/or add insulation to your roof space. 12 inches of insulation is recommended.
• If you are replacing a household appliance, check into it's green or energy saving features.
• Stop junk mail or unwanted catalogues . See web sites like Directmail.com, 41pounds.org, greendimes.com and many others for information on how to go about this.
• Repair or replace a dripping facet.
• Maintain, service your car to keep it's engine fuel efficient.
• Keeping vehicle tires at the recommended pressures reduces fuel consumption.
• Undertake an Energy Audit to find and improve your homes efficiency. You can find details on this by searching the web or sites like wikipedia.com will have information.

Step 3 - A lifestyle change!

• Downsize your car or change your car for a model that is more fuel efficient.
• Install a rainwater collection system to use rainwater for flushing the toilets, etc.
• If you are carrying out home improvements or a remodel, think about using renewable, recyclable, energy efficient materials. Recycle your waste, don't just send it to the landfill.
• Install water saving toilets.
• Replace old water heaters, air conditioning and furnaces with energy efficient ones.

Step 4 - As big as a house!

• Have a green house designed and built .
• Sell your car and use public transport for travel.

 

I have not included many items in Steps 3 & 4, this is for two reasons. Firstly they are major steps and can involve major costs and lifestyle changes and secondly, anyone who is looking to carry out this level of change is going to be researching the subject, hopefully.

Again the above is not a definitive list and not all changes are practical for everyone, but it doesn't take a lot of research or effort to make simple changes and these add up in savings for you and a cleaner environment.

How can this not be a good idea!

As a little teaser, we recently applied a few of these changes to our own home a couple of months ago. This has resulted in an approximate reduction of $50.00 per month in our electricity bill (compared to the same period last year. We will be making further changes.

 

Alan Langstone Real Estate Agent Langstone Team Carolina One Real Estate 1951 Clements Ferry Road Charleston, South Carolina, 29492	Work: 843-284-1932 Mobile: 843-709-8123 Fax: 843-202-8675 alan@carolinaone.com www.langstoneteam.com
"Trust, Integrity & Service"
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Here is the Home Staging/Redesign Question of the Day--I hope you enjoy reading it, and commenting on what you use in your own entertaining area--I'd love to hear from you!

What is the one piece of furniture that is at the "heart" of your entertaining area in your home that you really shouldn't (can't) live without?  Hint:  It serves many functions, and makes you comfy, organized, and serves you without ever complaining!

The answer is, of course, your coffee table!  It holds your beverage or food while you are watching your big screen tv. It politely holds your books, magazines and newspapers for you.  It can be a fun "game table" for monopoly, chess, or a sponstaneous game of checkers.  And, it keeps your cell phone, keys, wallet, etc. off of the floor while you are relaxing.  It can, also, store items such as games, toys, a cozy throw for those cool evenings, or other items that you can "hide" in the middle of your entertaining area and pull out in an instant!

There is nothing better than an open fire, friends and a bag of marshmallows. Some folks like to take their time and get them a golden brown, while others like to torch them to a crisp. Kinda fun to blow the fire out and eat the hot gooey mess... So what do rehabbed properties and marshmallows have in common? Read on...

Rehabs generally pose challenging situations for home inspectors as they are a blend of old and new constructions methodologies. I totally understand that neat stuff like granite counter tops, new hardwood floors, fresh paint and the like create an ambiance and eye candy that make the house more appealing to the buyer. This is great, and will certainly entice people to put a contract on a house, but is all this money wisely invested?

Granted, granite countertops are vogue and sexy - whereas a new electric panel is not. Get Real!!! Folks just don't oh and ah and rub their hands over a sleek new electric panel. No, we don't design our decor around the beauty of the grey cover. At best, we find a picture to cover the thing up! Both cost about the same amount of money, but a new counter top will not burn your new home down - a poorly wired and overloaded electric panel will.

Such is the case of this fused panel. Most all the circuits were overloaded. Years ago, when a fuse blew, it was replaced it with the same size fuse. If the fuse kept blowing, it was not uncommon to see folks install a size larger. If that didn't work, the size was increased until the demand on the circuit was satisfied. So what if, the wiring was glowing cherry red and you could toast your marshmallows? The fuse didn't blow!

I pointed out to the rehabber that the panel was badly overloaded and needed to be reviewed by an electrician - possibly replaced. After some discussion, his reply was that replacement would cost him about $800.00 - the same price as the granite counter top! C'est la vie, a bag of marshmallows costs about $2. Come to think of it, it has been awhile since I have toasted some...

Wishing all my fellow drips and tweeps a great day... 8-)

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© 2009 michael thornton | complete home inspections, inc. - your building consultants for life | brentwood, tn | 615.661.0297 | www.completehomeinspectionsonline.com

If you caught my CNBC segment the other day, I briefly mentioned the idea of eliminating a few steps in the process of getting a loan.

Since the federal government now controls most of the mortgage underwriting standards in the US anyway, let's try something new and less expensive for the consumer!

1. Combine Fannie, Freddie, FHA and VA into one agency.  Make a set of underwriting guidelines that everyone can follow and be consistent.

2. Have the U S government guarantee every mortgage because of a small mortgage fee on every loan (like .25 of a point in fee, a la the NY mortgage tax).  This way, if a loan goes into default, the balance of what is not covered by foreclosing is paid in by the fund.

3. Licenses, train, bond, background check and check up on loan originators.  Then the licensees can originate a loan and have the government agency fund it directly.  The Feds can then sell the loans off as new-age Mortgage Backed Securities to investors.

4. Currently, homes that go to foreclosure that are "rough" can only be bought, in cash, by investors.  How about a program that gives people money to fix the home and a mortgage/inspection contingency so that homeowners can buy more homes!

5. Instead of the $7500 credit, how about a direct 5% down payment that is paid back over 15 years with 4% interest for the government.  Then, if you default on the mortgage, your rate would go to 12% and it would come out of your tax refund.  

This way, we can get people into homes with low down payments again, but with a real hammer if they don't pay! 

6. We can offer a 100% program a la the way VA does it.  Again, if you default, the top 5% would come from your tax refunds!

7. If a loan has to go to foreclosure, there will be a limit as to what a loan servicer gets (including legal fees) and when a loan goes more than 60 days, the servicing fee would be shut off unless certain guidelines are met.

We need the entire mortgage business restructured, streamlined and made more practical. 

These items above get it going.

Sellers don't ask much.  They just want you to sell their home.  That's all.  Nothing more.

Cough, cough...  Did I say "nothing more"?  I forgot to mention they also want you to make their home into a rock star. 

Sellers want to see their home in full color on a flier to be distributed at their home; in a full-page ad in the local newspaper; on billboards (Times Square in New York would be even better!); plastered all over the Internet; on film in a starring role...

Actually, all it takes is a Real Estate Show for their house, and they're blown away.  Many ActiveRain veterans know and use this product, but some of you may not have discovered it yet.  This is for YOU!  (And some of you who do use it may not have fully explored its capabilities.)

The obvious:  It's a virtual tour, like the one I created for my newest ActiveRain listing, 8200 Hortonia Point Drive) 

You choose the photos and the music, of course, but you have so much greater flexibility:  You can change the order of photos after they're uploaded, or even replace them.  You can move the camera focus to any point on your photo - the default could fall on the electric outlet under the table , for example, and you want it to be on the flower arrangement on top of the table.  You can change the camera movement from "in" to "out" or "left" or "right".  You type in the title, if you even want one, and you can choose the style and color of font.  And you can make this a 30-second, 60-second, or 90-second tour that can be used on many MLS systems, made into a CD, or posted in your blog.

Almost as obvious...  It's a flier.  Yes, just type in the amenities, price and a few more details to create a flier, and now you can post that flier online with the touch of a single key to google base, oodle, trulia, zillow, vast, hotpads, geebo, viewr, clickapost.  Talk about impressed... wait 'til your sellers hear about this!  (No need to tell them how easy it is.)  The best part of this flier?  Your virtual tour is included in the body of the flier!

For a long time, that was all I needed to know.  I was sold.  Sign me up, please.

Then I took the time to view a Real Estate Show from the perspective of a home buyer, and started clicking on the links in the left navigation bar.  Try it - go back and click on the sample show for 8200 Hortonia Point Drive and you can see more reasons why sellers will love you for creating this masterpiece.

Location takes you to a google map for the property, with a bubble indicating the precise location of the property.

Print provides an option to print out the flier - something you want buyers to do, right?

Mortgage takes you to a mortgage calculator with the sale price of this property already filled in.  How easy is that?

Schools actually lists both the public and private schools near the property address.  Can you believe that?  I never have to look up that info again, I can just find out by looking at my own real estate show.

Email makes it easy for buyers to forward a copy of the show (with all these great links) to their spouse, mom, best friend, real estate agent...

Why will sellers love this?  Because they know BUYERS will love it!

There have been many earlier posts on Real Estate Shows by Jeff Turner (Founder, CEO, Pres), Sarah Cooper and others on ActiveRain, so be sure to check them out.  You may even find the discount code for ActiveRain members in one of those posts.  In the meantime, sign up for a free 30 day trial. 

P.S.  There are no rules that say real estate shows can only be used for real estate.  I created one for the Christmas decorations at my daughter's house, for example, or you might use one to show off a new baby in your family.  I made one to promote the idea of a "staycation" displaying things to do in my neighborhood, and posted it in a blog.  They even have some pre-made shows that provide the flexibiity to customize by substituting photos or changing the text.

Real Estate Shows

The bursting of the housing bubble has created huge losses in wealth.  Many are now upside down on their home and feel trapped without any good solutions. 

A popular line in one of my kid's favorite movies, National Treasure, is "Someone has to go to jail".

When asset bubbles are burst, "Someone has to pay".  It's even more of a cold, hard reality because there is no one who can simply sign a pardon and get rid of all the losses. The losses are real and aren't going away by executive order.

The big question is, who pays?

In the free market usually the parties who freely entered into a contract with each other assume all of the risks along with all of the rewards.  People take out mortgages to buy homes, many with the hopes that they will be able to eventually sell for a higher price and make a nice profit.  What a great deal.  Instead of throwing their money away in rent payments, they become owners and make mortgage payments instead.  If they get 100% financing, it looks like a complete no-brainer decision.  Just by living in a home, one can become wealthy.  Many people did. Many people envied the home owners who made hundreds of thousands of dollars just by being an owner instead of a renter. 

But with opportunities for rewards, come the risks of being an owner.  Sure, many people ignored the risks of home prices actually going down.  Most thought that that was an impossible scenario.

Now many people owe $300,000 on a home that they might be able to sell for only $200,000.  They're in a real bind if they have to sell right now.  I feel for them.  It really stinks to be in that situation.

People are looking for solutions to get people out of this unfortunate situation.  Unfortunately, someone has to pay.

Some people seem to think that the government or banks should bail the homeowner out.  

• Either by  giving them the $100,000 to cover them for their negative equity so that they can now sell at the market price of $200,000, or
   
• they want the banks to reduce their mortgages down to $200,000.
  
• A third alternative would be to give the potential home buyer an extra $100,000 so that they can pay the seller the full amount, $300,000, in order to pay off the mortgage.  This would keep homes prices at bubble prices and we can just make believe that nothing ever happened.

Any one of these sounds wonderful at first glance. But step back and figure out where the money is coming from.  If the government gives out money, they have to get it from somewhere.  Government doesn't create any wealth or real money. 

1. It can only take it from one group and give it to another. So it can collect taxes from the many and give it to the fewer homeowners in trouble.
2. It can borrow money which places the burden of repayment, with interest, on to the next generation. 
3. It can just print more fiat money which then eventually devalues all of the current dollars in circulation.  This is basically just another form a taxation but it's more invisible and harder for people to pinpoint the blame.
   
   One way or another, someone has to pay.

Forcing the bankers to forgive the $100,000 usually sounds good to many people.  But follow that through and see who really takes the hit.  All of those mortgages were packaged into securities that were bought by investors.  Many of the investors were people like you and me who were just trying to make a little interest off the money that they worked so hard to save.  Many have retirement accounts that have funds that  invested in these "safe" bonds.  So if you require the banks to reduce the mortgage amounts, then all of these securities get reduced accordingly and anyone with any exposure to these securities takes the losses.  

The next thing you would need then is to have the government step in to guarantee all of these mortgage securities.  With what money?  See the paragragh above about how government gets their money.

I'm sorry to say that there just isn't any clean and easy solution to this mess. 

I have confidence that when government steps aside, the true free market process is the most efficient mechanism to get things where they need to be. 

Government has it's role, but not as the entity that decides the winners or the losers or the one who tries to spread the losses around.  Their role is to prosecute fraud and to provide transparency in the markets so that people can make the best informed decisions. 

Doing nothing sounds so lame and unresponsive.  But many times doing something just for the sake of trying to look helpful, actually worsens the situation and prolongs the agony.

The sooner the losses are taken, the sooner we can get back to some sanity.