Category: Credit Score

Credit Tip – Charged Off Credit Cards


Today I want to thank Matt with Synergy Credit Pros for the great information! Give him a call for personal credit repair. They are the real deal! Matt “The Bureau Crusher” Johnson @ 281.971.9887.

As you have learned before in the past from our credit tips, paying off most collections will have a negative impact on the credit score.

Why is it that paying off a charged off credit card that is held by the original creditor, the only collection that will boost your credit score? The reason is because a charged off credit card is impacting two sections of the client’s credit score where all other collections are impacting only the payment history section of the credit score. When you pay off a collection, it will push forward the date of last activity and the reporting dates which will have a negative impact on the credit score.

However, when you pay off a charged off credit card held by the original creditor it will also clear up the amounts owed section of the credit score. So, when you pay off a credit card, it will push forward the reporting date and date of last activity which will drop the score about 10-20 points but will also see a gain of 40 points by clearing out revolving balances, which will net the client 20-30 points.

If the charged off credit card is transferred from the original creditor to a third-party collection company, it will not benefit the client because it is now an O-9 instead of an R-9 so it is not impacting the amounts owed section of the credit score anymore. If the charged off credit card is 4 years or older, we do advise you to call us first to look at the report and make sure it is an account that will benefit the client. If it is 4 years or younger, you can go ahead and have the client pay it off because it will be beneficial for the score.

Be sure to check out my website for more credit tips and tricks as well as other useful information about the homebuying process!

9 Tips for Improving your Credit Score

Congratulations on beginning the home buying process. You’ve started in the right place by researching how to best prepare yourself for submitting a mortgage application. A major part of that application is the home buyer’s credit score which examines many years of your financial history.

About Credit Scores

Known as FICO scores, credit scores were developed in the late 1990s to serve as an objective method for assessing an individual’s credit management habits. As a portion of the mortgage application process, your credit score allows lenders to determine which type of loan you are eligible for and the pricing tier you qualify for when searching for a new home. Credit scores range from 300 to a high of 850, with most lenders looking for a median score of at least 640.

There are 40 factor codes divided into five main categories that are used to calculate a credit score:

  1. Past Payment Performance (35%) – This indicator shows how often you pay your bills on time. If you let bills and debts slide, thus incurring late fees, this will negatively affect your credit score.
  2. Credit Utilization (30%) – This factor examines how you use credit. In regards to applying for a mortgage, lenders like to see 3-5 credit cards in use for a period of no less than two years to know that you understand credit and utilize it properly.
  3. Credit History (15%) – A look at of the financial accounts in your name and the length of time they have been open.
  4. Type of Credit in Use (10%) – Accounts such as mortgages, auto loans, revolving or installment accounts show the type of credit you’ve used.
  5. Inquiries (10%) – This refers to any formal inquiries made about your credit. Any time a company makes an inquiry about credit score, it impacts said score. Too many inquiries can be the difference between getting a mortgage and not. If you’re planning to buy a home you need to be very judicious about who you give your Social Security Number to.

Improve Credit Score Before Applying for a Mortgage

It might seem like your credit score is chiseled in stone but that’s not true.  A credit report (and a credit score) is a snapshot in time. If you are planning on buying a home soon and are concerned with your credit scores, there are steps you can take to ensure they will be better before submitting a mortgage application.

  1. Speak with a financial professional. Before, you close any accounts or make any changes to your credit profile, speak with a knowledgeable loan officer about the best course of action to take so you can be strategic about your overall mortgage plan. A professional, experienced loan officer will be your guide throughout the home buying process and is there to help you successfully submit your mortgage application.
  2. Pay all of your bills on time. Always. Past Payment Performance accounts for 35 percent of your credit score, so it’s imperative that all bills are paid in a timely manner. A great method for making sure your bills are paid on time is to set up reminders on your cell phone’s calendar. Also, many companies allow users to set up recurring payments to automatically pay bills to eliminate the monthly hassle.
  3. Under-use existing credit cards. While it is important to have credit cards in use, you want to under use them. Try to keep a balance that is no more than 35 percent of your credit limit. Maxed out credit cards reflect poorly on your score.
  4. Don’t pay off your credit cards unless you normally pay them off at the end of every month.  A zero balance has a negative impact on your credit score – leave a small balance.
  5. Review your credit report for any errors. You should not be penalized for errors made by creditors and you are entitled to have these mistakes removed from your credit report. Unfortunately, any mistakes might negatively impact your overall score and thus change the outcome of your mortgage application. Your loan officer will tell you exactly what you need to do to clean up any incorrect information from your report.  It’s not a good idea to formally dispute any charges until you’ve spoken with your loan officer.
  6. Do not apply for unnecessary credit. You want to limit any applications you might make for additional credit, whether you are considering buying a new car or you want to acquire another credit card. Your top priority is your mortgage application. Extra credit lines can absolutely be considered once everything has been settled with your mortgage.
  7. Increase credit limits. Speak with the banks and companies that hold your credit cards, and see if they will extend your credit limits. The increased credit limits reflect well on you but the unnecessary spending of that credit works against you. A word to the wise: be careful not to increase your spending habits if you get additional credit.
  8. Begin the process sooner rather than later. If you think you’ll be buying a home within the next year or so, the time is now to take steps to improve your credit score. Work with a loan officer, organize your bills, and follow the other tips mentioned here so when the time comes to apply for a mortgage, there are no unwanted surprises awaiting you. Believe it or not, you’re probably in much better shape than you realize.
  9. You may get a free credit report once a year from  This will not be reflected as an inquiry on your report.  You will be asked if you would like to pay for an upgrade but that’s not necessary.  You will need to follow the prompts to request your report from each credit reporting repository – Equifax, TransUnion, and Experian.  You should request your free report from all three bureaus – they don’t always report the same information.

Buying a home is an exciting yet nuanced process, with many moving parts. To make sure you move into the home of your dreams, you want to work with a trusted and tested expert who will walk you through the process and answer each and every one of your questions. With 24 years of experience as a loan officer and 10 years of experience as a realtor, Dorothy Erminger has the expertise every homebuyer needs to successfully submit a mortgage application. Contact Dorothy today to start taking steps to improve your credit score.

Credit Inquiries and Credit Score

Accounts: All 4 Types of Inquiries

Inquiry—is the common term that is used to describe someone who is checking into and/or viewing your credit. Basically they’re inquiring about someone’s track record and payment history to creditors.
Many experts in the industry rate the inquiries down to a two part description. The two part description is usually labeled “hard pull” or “soft pull” inquiries. Most people who refer to these two terms lack the over all understanding that there are actually 4 types of inquiries. The four different types of inquiries are used for different purposes and can either affect your score or not affect your score.

The four different types of credit inquiries are labeled as: account review inquiries, promotional inquiries, standard inquiries, and self pull inquiries. It’s easier to just use the first part of the term rather than having to verbally state all the words attached to inquiry with every description.

An “Account review inquiry” is when a potential creditor requests from the bureaus, permission, to review your account for only negative information within a certain time frame. This potential creditor does not receive good information about your credit and does not receive your credit scores (only information on recent delinquencies). An example would be if your ALLSTATE INSURANCE desires to request an account review on your negative payment history over the last 12 months. This information could be very valuable in determining your financial strength, financial reliability and responsibility, and in determining if there may be a common sense reason that you are now a higher insurance risk and are more prone to be in an accident and cost ALLSTATE INSURANCE more money.

This type of inquiry would be labeled a “soft pull”, because it is not factored into the credit risk scoring formula to remove points off your credit score. One of the major flaws with the account review inquiry is that it does not take into detail or exception if an individual has earned a lot more money, opened a lot of new accounts, mistaken or misapplied payments or, had lates that another creditor should’ve paid off to another creditor in the transfer and pay off of prior loans. This unfortunate example could lead to increased insurance rates to a prospering and responsible individual which is completely unfair.

“Promotional inquiries” are requested with the sole purpose of just receiving a credit score only. A promotional inquiry will not include information on recent lates, collections, public records, information on types of accounts, and who your creditors may be. Once again the only information that is provided to your requested potential creditor is simply a credit score. Promotional inquiries are usually distributed for the sole purpose of deciphering statistically who would be the best candidates to send credit promotions. The most common type of credit promotion is mailing offers with applications for credit cards. The credit card companies save time and money by narrowing their targeted audience to people who they feel would qualify for their credit offer. This saves them time, money, and makes the credit card companies way more money. Promotional Inquiries do not hurt your credit score and just like Account Review Inquiries, they are not even seen by your future potential creditors when they view your credit history.

“Standard Inquiries” are requested by your creditors when you are applying for a loan, money, line of credit, or extension of credit. You may be shopping for a car, boat, applying for a mortgage, applying to rent an apartment, leasing a tractor or construction equipment, buying/leasing furniture, or
computer equipment etc. These loans are very important to you because you want the best deal
knowing you can save thousands of dollars on interest by purchasing from a lender that gives you the best interest rate. The problem is the more you shop around the more potential risk you have of continually lowering your credit score. The scoring model has attempted to make changes so they don’t continually brutalize the savvy and thrifty shopper that is trying to get the best deal.

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This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.