4/6/2011 11:33 AM ET|
Bounce back from bad credit
It's a slow process, and any missteps will make it even slower. Unfortunately, some of your assumptions about how credit scores work may be wrong.
Clawing your way back from a credit disaster isn't easy. And the higher your credit scores were, the longer it will take to restore them.
Those facts are made abundantly clear in new charts released by Fair Isaac, the creators of the leading FICO credit score. The charts detail how many points people with mediocre, good and excellent scores lose when they suffer certain credit setbacks, and how long it takes their scores to recover.
Let's look at the first chart, which shows the variable damage inflicted by skipping mortgage payments, short sales, foreclosure and bankruptcy:
|Consumer A||Consumer B||Consumer C|
|FICO score after these events:|
|30 days late on mortgage||600-620||630-650||670-690|
|90 days late on mortgage||600-620||610-630||650-670|
|Short sale (no deficiency balance reported)||610-630||605-625||655-675|
|Short sale (with deficiency balance reported)||575-595||570-590||620-640|
As you can see, the same events have different impacts. Consumer A, with a mediocre score of 680 on the 300-to-850 FICO scale, loses fewer points with each negative action than Consumer B, who has a good score of 720, or Consumer C, who has an excellent score of 780.
That may seem unfair, but it's how credit scores work. A lower starting score reflects the fact that the person has had some credit troubles in the relatively recent past, indicating a greater likelihood of defaulting again. People with higher scores are seen as less risky, so their scores react more dramatically when negative events occur.
Another fact to note: A short sale on a home (selling it for less than what you owe) results in slightly less damage than a foreclosure only when no deficiency balance is reported to the credit bureaus. Because a short sale by definition creates a deficiency balance, pretty much the only way you'll escape the full damage is if you can persuade your lender not to report the deficiency to the credit bureaus.
Otherwise, a short sale has exactly the same impact as a foreclosure on your credit scores.
Also, if you enter a loan modification program with your lender, you may well hurt your credit scores. Many lenders report borrowers as "late" when they're in the modification's initial trial period, because the borrowers aren't paying as originally agreed. As you can see, reports of late payments can really trash your scores.
Now let's move on to the second chart. Here's how long you'll need to recover:
|Consumer A||Consumer B||Consumer C|
|Time for FICO to recover after these events:|
|30 days late on mortgage||~ 9 months||~ 2.5 years||~ 3 years|
|90 days late on mortgage||~ 9 months||~ 3 years||~ 7 years|
|Short sale (no deficiency balance reported)||~ 3 years||~ 7 years||~ 7 years|
|Short sale (with deficiency balance reported)||~ 3 years||~ 7 years||~ 7 years|
|Foreclosure||~ 3 years||~ 7 years||~ 7 years|
|Bankruptcy||~ 5 years||~ 7-10 years||~ 7-10 years|
Once again, people with better scores suffer more: It takes them much longer to regain lost ground.
A person with a mediocre score can return to 680 in about nine months after a skipped mortgage payment, while the person with the 780 score may need three years to return her score to its once lofty peak. (The person with the lower score has fewer points to recoup, and adding points is typically much more difficult than losing them.)
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A foreclosure occured due to the head of household having a serious medical event that led to temporary disability and subsequent unemployment. It has been 3 years and all is well with health and finances. How can you get a lender to consider the circumstances surrounding the foreclosure and make another mortgage loan.
Credit? lol. Everyones goal should be a credit score of 0. pay cash. if you absolutely MUST have that new house you can get financed. Save your cash then Drop a 50k - 100k down payment on it. Scumbag bank will finance you then gauranteed - plus you get the joy of telling them to shove the mortgage insurance where the sun doesn't shine as well.. Then pay it off in less than 5 years.
Big Bussiness can shove credit garbage right up their ****. I live well have nice big boy toys and don't owe anyone a dime.
My credit score isn't 0. But it's close......
ALMOST..... THERE..... I figure another 4 years of not buying anything on credit and paying all bills , utilities in cash will do it.
PS nothing is more satisfying than paying your utilities in cash as well. It annoys them greatly which makes me happy as well.
One of the key factors in being able to "bring my crud-it score to zero" is to just plain consider what YOU need and want (and know the difference between those two), not what will impress others. As a salesman I learned that the people with the huge McMansion, new driveway bling, etc had huge debts and often didn't have anything in their accounts to write a check for what I was selling. And when they financed their paper came back as subprime.
I've been trying to be the kind of customer I liked best: Hard to sell, but when they like what they see they can write a check and be done with it.
How do I go about trying to get some credit restablished since I've been a victim of Identity Theft?
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