Sometimes paying your bill the wrong way — or in this case, trusting that an ex-spouse will get it right — can torpedo a good credit score, as one reader found out. Here’s her story:

I have been divorced for 6 years, and my ex-husband kept the house that we lived in. He has made all house payments on time in the last 6 years. When he got down to a small amount being owed ($188) on the small loan of our 80/20 split mortgage, he sent in a check for the final amount — Not knowing there was a rule of making a final payment with a cashier’s check in lieu of a personal check. The mortgage company eventually returned the check and advised him of the same, however by then the mortgage payment was late. This resulted in them reporting this on both of our credit [reports], dropping [my score] 150  points . The error has since been resolved and the total loan amount is paid in full, however they are refusing to remove this from my credit report. I understand the whole “my name is on the loan” reasoning, and I don’t disagree with it, however this was an honest error on an otherwise spotless credit history on my part . . . . I have disputed it with the credit agencies, disputed it in writing with the mortgage company, but am looking for any advice to repair my credit score that has dropped from 780s to 600s?????

The drop in her score, from the “excellent” range to “poor/fair” territory, as a result of just one late bill, illustrates the impact that a single misstep can have on an excellent score. The good news here is that if she has other credit accounts, she won’t have trouble adding positive information to her credit reports, and those will help dilute the impact of the negative mark. So will time. The further this recedes into the past, the less impact it will have. (Our reader can and should check her scores regularly to track her progress. Credit.com offers two credit scores every 30 days for free.) Her best bet at this point is to pay bills on time and to make sure her balances aren’t higher than 20% to 25% of her credit limits.

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http://finance.yahoo.com/news/paid-off-mortgage-credit-score-090024713.html

Ever hear stories in the break room about how difficult it is to get a mortgage? “I have to jump through so many hoops to get my mortgage, it’s ridiculous. They keep asking me for financial information, I swear I already gave it to them.”

Reality check: Obtaining a mortgage is no easy feat these days, no matter how great your credit score is or how good your lender is. By understanding the loan process, however, you can make sure you don’t have to jump through hoops, and more importantly, that your loan closes on time.

The Nature of Mortgage Lending

Lenders have to meet tight federal requirements on your ability to repay. This includes a thorough review and examination of your credit, debt, income and assets, as well as the property and occupancy of the home in which you plan to be financing. Furthermore, lenders operate in a world in which they usually only have a one-time chance to make how you look on paper favorable to the decision-maker, i.e. the underwriter, the person within the mortgage company who issues an approval.

Know this: The role of the lender’s underwriter is to mitigate risk for the mortgage company. They carry out this objective by making sure your full financial picture adheres to Fannie Mae and Freddie Mac guidelines, which serve as the model for other lenders and loan programs.

The reason you’ll often hear stories about all the hoops to jump through is because the loan officer did not properly set the borrower’s expectations at the forefront of the loan process — and/or the loan was not put together correctly. Remember, it’s very difficult to create a second first impression — if your loan officer did not properly package the loan for the underwriter to thoroughly examine and subsequently sign off, then you may have a cumbersome process. That’s if the loan can be approved.

Here’s a typical mortgage loan process:

1. Lender gathers your financial documentation.
2. Loan officer drafts a cover letter to the underwriter laying out the framework mortgage scenario.
3. Underwriter reviews the complete credit package, ensuring the documentation adheres to risk requirements.
4. Underwriter issues a disposition — a new loan status, approved with conditions, or at times a suspense.

The ideal outcome is the loan officer provided all of the necessary documentation, preemptively demonstrating how the loan package meets all the lending guidelines of the particular program the borrower is applying for, such as a conventional loan, FHA loan, etc.

read more…

http://finance.yahoo.com/news/why-shouldnt-jump-hoops-mortgage-100047265.html