Why You Should Never Co-Sign for Your Kids - Current Rates, News and Information about Credit

Why You Should Never Co-Sign for Your Kids - Current Rates, News and Information about Credit

Problems with Mortgage Companies' Credit Reporting

Mortgage loan companies and mortgage servicing companies do not always accurately report on consumers' credit history after such events short sales, foreclosures, and payment modification plans.

In a short sale a lender allows the home owner to sell for less than the amount owed on the mortgage. Effective July 15, 2011, an owner selling a house or apartment building with four or fewer units in a short sale will not owe the lender a deficiency balance (Civil Code Section 580e). Therefore, after a short sale, the lender should not report the consumer owes any money on the mortgage loan.

If a purchase money lender forecloses on four or fewer units, the lender may not seek a judgment for the deficiency balance. Civil Code Section 580b. This law applies to both 1st and 2d mortgages. Any post-foreclosure report to the credit bureaus should make clear that the former home owner is not subject to a lawsuit and judgment. A report that a debt of $100,000 (the deficiency balance after foreclosure) is “due and owing” is misleading because the lender has no recourse to the courts to collect the $100,000.

Under the Home Affordable Modification programs, a lender typically agrees the consumer may pay less on the mortgage during a trial period. Under these programs, if the owner was current on the mortgage payments before entering into the program and makes the required reduced payments during the trial period, the lender may not report late or inadequate payments to the credit bureaus. Once a permanent modification plan is in effect, if the owner makes the required mortgage payments, the lender may not send adverse reports to the credit bureaus.

Credit File vs Credit Score

I tell people to focus on credit reports over credit scores because there are simply so many scores out there. Among generic models, there is the VantageScore model and multiple FICO models.

Each credit score model may differ in terms of the weightings of certain factors or how it is constructed. For example, a model might place a greater emphasis on the balance of your credit card. Simply, “your credit score” is not just one score.

However, all the credit scores come from one place: your credit file. So rather than comparing your various credit scores all the time, it’s more productive to make sure the information in your credit file is up to date and accurately reflects your prudent debt management steps.

Yes, credit scores do matter. They are an important part of our financial well-being and having a good credit score can literally save you thousands of dollars over the course of a loan. Plus, having a “directional” idea of your credit score can be useful, especially if you are going to apply for a loan in the near future.

ScoreWell Credit specializes in educating you on your credit file, coaching and providing you with accurate information and most importantly……  removing outdated, unverifiable and incorrect data on your report.