Many new homeowners worry about their credit. They are concerned that with their particular situation, they will never qualify for a home loan.  FHA loans are particularly designed for folks who’ve lived a real life with real life problems that caused “dings” to their credit report.

There are a few myths you should be aware of when you are working to repair your credit:

Myth #1 If a negative item is successfully deleted from my credit report, it will just come right back on my report.

The credit bureaus have cleverly spread this myth through the news media and government agencies. In truth, the credit bureaus will often temporarily delete a negative listing if they have not heard from the credit grantor for 30 days since an item has been disputed. Should the credit grantor submit verification a week or two later, it will be re-inserted. (This is called a soft delete.) Most of the time the creditor simply fails to respond and the negative item is permanently deleted. If the creditor verifies the item the account may still be deleted later in the process as the challenging process is intensified.  (If you have questions about dispute letters click here)

Myth #2: When I pay off a past-due account, such as a charge off or a collection account, it will show “paid” and no longer be negative.It is difficult to fully restore your credit without paying your outstanding debts. However, paying off a debt can actually hurt your credit. Negative items on your credit report are allowed to stay on your credit report for a maximum of seven (7) years, except for bankruptcy that can stay for up to ten (10) years.

his 7 or 10-year clock begins ticking at the date of last activity. Making a payment represents new activity and restarts the clock. When paying an outstanding debt, you will change the account status to paid collection, paid charge-off, satisfied judgment, or paid ‘was xxx days late”. This is still considered very negative and appears as though you had to be strong-armed by the credit bureau to pay the account.

It is almost always prudent to have a professional help so as to not further damage your credit by trying to do the right thing… we counsel people everyday and help them improve their scores!

Myth #3: I can create a totally new credit file by getting a federal tax ID number or changing a few numbers on my social security number. This fraudulent scheme has proven to be complex, difficult and illegal. Lying on a credit application is a criminal offense and with the linking of computer systems it is virtually impossible to get away with. It is in your best interest to face the music by confronting the credit bureaus armed with the rights congress has granted you through the consumer protection laws.

In general – FHA is looking for a credit score of at least 620 and good credit for the last 12 months.  Because Fannie Mae and Freddie Mac recently announced they are going to STOP purchasing loans with credit scores under 640, this may shortly be the bench mark!

If you have questions about qualifying for an FHA loan in Raleigh, Cary, Apex or Holly Springs, contact Steve and Eleanor Thorne, 919-649-5058, we have the BEST RATES in the Triangle!

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