Credit Q&A

How are FICO scores calculated for married couples?

Married couples don't have a joint FICO® score, they each have individual scores. The difference is that when you are single you usually only need to worry about your credit habits and profile. However, when you become married your spouse's credit habits and profile have an impact on yours. For example, if you have a credit card in both of your names and it doesn't get paid on time, that can affect both of your FICO scores – and not in a good way.

If lenders are going to be changing their lending requirements, how can I know if I qualify for affordable financing?

The surest way to get the most up-to-date and accurate information is to contact a number of lenders for their FICO® score requirements before shopping for credit. It's also a good idea to obtain your current FICO score so you'll know exactly where you stand in the eyes of these potential lenders.

How does refinancing affect my FICO score? What about if I modify the terms of my loan?

Refinancing and loan modifications can affect your FICO® score in a few areas. How much depends on whether it's reported to the credit bureaus as the same loan with changes or as an entirely new loan.

If it's reported as the same loan with changes, three pieces of information associated with the loan modification may affect your score: the credit inquiry, changes to the loan balance, and changes to the terms of that loan. Overall, the impact of these changes on your FICO score should be minimal.

If it's reported as a "new" loan, your score could still be affected by the inquiry, balance, and terms of the loan, – along with the additional impact of a new "open date." A new or recent open date typically indicates that it is a new credit obligation and, as a result, can impact the score more than if the terms of the existing loan are simply changed.

Credit questions? Please feel free to call or email me with any questions you have about credit. If I use your question, you could win dinner for two!!

Posted by Eric Nichols on February 2nd, 2010 10:24 AMPost a Comment (0)

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Whats with the new Real Estate finance forms?

February 3rd, 2010 6:59 AM

As of Jan. 1, lenders and settlements agents will be required to use new Good Faith Estimate and HUD-1 closing statements. HUD has been working on these forms for more than a decade and with good reason: The government estimates that consumers will save $700 per transaction with the new forms.

The GFE is the form you receive from a lender that gives you some sense of how much cash it will take to finance or refinance real estate. Unlike the old form, the new one explains what lender fees can be changed, not changed or changed by no more than 10 percent.

No less important, the new form shows the cost to originate the loan - a cost that must include any yield spread premium.

Yield spread premiums can be good for borrowers when properly used. For instance, you might get a somewhat higher interest rate for a mortgage if the lender will pay some or all of your closing costs. That can be a good trade-off to save up-front cash.

The problem is that mortgage pricing is complex and some borrowers unknowingly pay higher rates but get no benefit. As an example, the Wall Street Journal says 61 percent of the subprime borrowers financed in 2006 actually qualified for better loans and lower rates. (See: "Subprime Debacle Traps Even Very Credit-Worthy," Dec. 3, 2007)

With the new GFEs borrowers will be able to easily see mortgage costs, and they will be able to compare loans from different lenders. No less important, the numbers from the GFE plug into the new HUD-1 tally sheet used at closing. Borrowers will be able to immediately compare the rates and terms promised with the rates and terms that have been delivered.

Copies of the new forms, as well as point-by-point explanations, are available upon request. Just email me today!

Posted by Eric Nichols on February 3rd, 2010 6:59 AMPost a Comment (0)

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