Credit Score Myths Revealed

Written by Lending Tree on Tuesday, 01 October 2013 2:27 pm

When you apply for a mortgage, line of credit or even a department-store credit card, the lender will check your credit score. This figure, a measure of your past ability to make payments on time and manage your credit, will be somewhere between 300 and 850, with the average American coming in around 678, according to Experian’s 2005 National Score Index. If your score is too low (most lenders consider anything below 620 to be “sub prime,” or higher risk) you may not get the loan you’re seeking or, if you do, it will likely carry a higher interest rate.

With so much riding on this number, it’s important to understand what factors affect it. Unfortunately, there’s a lot of misinformation floating around about credit scores. Here are six of the most common myths and the facts to set you straight.

MYTH #1: The major bureaus use different formulas for calculating credit scores.
The three major credit bureaus — Equifax, TransUnion and Experian — sell their services under different names, but they all use the same formula to arrive at their numbers. Your score may vary slightly between the bureaus, however, because each has different information in your file. For example, one bureau’s records may go back longer, or a previous lender may have shared its info with only one bureau and not the other two. Unless the scores are wildly at odds, many lenders will use the one in the middle when they consider your application.

MYTH #2: Closing old accounts will boost my credit score.
Having too many credit accounts can negatively affect your credit score, but canceling them may not improve it. In fact, it could do harm. To measure your ability to manage debt, credit bureaus look at the amount of credit you’re using compared with the total amount you have available. So closing unused accounts reduces your untapped credit and may make you appear overextended. Closing your oldest accounts is even worse because the longer a line of credit is open, the more history you’ve accumulated. If you do close an account, consider closing your newest one and transferring any balance to an older one.

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MYTH #3: Shopping around for a mortgage or car loan will hurt my score.
When a lender makes an inquiry about your credit, your score has the potential to drop up to five points. For this reason, some borrowers are afraid that comparison-shopping for a mortgage or auto loan will result in multiple deductions. This isn’t the case. The score is set up to take into account that even though you are only looking for one loan, multiple lenders may request your credit report (i.e. make an “inquiry”). For that reason, all mortgage or auto inquiries made in the 30 days prior to when you choose your loan will not affect your score. To determine your score, the credit agencies also look back at any auto or mortgage inquiries that were made in the past two years (but are older than the 30 day window). If there are any within that 2-year window, all of the inquiries that fall into a normal “shopping period” are counted as just one inquiry when determining your score. The length of the “shopping period” varies depending on the version of the FICO scoring formula used by your lender and can be either 14 days (older versions of the scoring formula) or 45 days (newer versions of the scoring formula).

Here’s an example: Say you are applying for a loan and are talking with four lenders. All four pull your credit report. If you choose a loan within 30 days of those first credit pulls, the inquiries will not affect your score. The score then looks at the past two years of your credit report. Say you applied for a car loan a year ago with three lenders. If your current lender is using the older version of the scoring report, all three inquiries will count as only one inquiry, as long as they occurred within 14 days of each other.

MYTH #4: Paying off my debts will instantly repair my credit score.
Your credit score is a measure of your past performance, not your current debt load. Paying off your credit cards and settling any outstanding loans will certainly help, but if you have a history of late or missed payments, it won’t undo the damage overnight. Improving your credit score takes time, so after paying down your debts, make an effort to consistently pay your bills on time.

MYTH #5: Companies can fix my credit score for a fee.
You may receive an offer from a company that claims it can fix your bad credit rating. The truth is if the credit bureaus have accurate information, there’s nothing you or anyone else can do to quickly improve your score if you haven’t managed your debts well in the past. (The only way to influence your score is to start managing your debt wisely.) And if there are errors in your file, you can contact the bureaus directly — you don’t need to pay someone else to do it. The three major bureaus have instructions on how to do this on their Web sites.

MYTH #6: Requesting your own credit report will affect your score.
Credit bureaus do not penalize you for checking your own score, nor do they deduct points for inquiries from landlords or employers who may check your score with your permission. On the contrary, it’s a good idea to check your credit score with all three bureaus occasionally, especially if you plan to apply for a loan. This gives you an opportunity to correct any errors in your file before lenders make their inquiries.

Basic Lawn Care Tips

Basic Lawn Care Tips

Master the basics of lawn care and everyone will be happy — you and your lawn.
By Melanie Haiken

You know a healthy lawn when you see it: a smooth, lush green carpet, perfect for cartwheels and croquet. So why doesn’t your lawn look like that? To get that perfect lawn you may have to change your mindset, says landscape designer Gary Alan ( “You know how in golf they say ‘Be the ball’? Well, you’ve got to be the grass. You’ve got to think about what it needs,” Gary says. The basics, he says, are pretty simple: sun, water and fertilizer. Once you get those down, everyone’s happy — you and your lawn. Here’s how to get started.

Setting Soil

Planting a new lawn is like any good adventure: preparation and planning are key. No matter which planting method you plan to use, you need to prepare the area thoroughly to banish weeds and make sure soil won’t immediately crust over or compact into lumpy ruts. John Griggs, a master gardener in West Virginia, says the most important step — and one that many gardeners skip — is testing the pH of your soil. Do-it-yourself test kids are available from nurseries and catalogs, or you can take advantage of the testing offered by your state’s designated agricultural university. “It might seem like a hassle, but testing your soil will save you from pouring money into the ground,” John says.

Start by stripping the area of all weeds, including roots, even if that means taking off the top six inches. Then rototill to a depth of at least six inches to loosen compaction and improve drainage. It’s extremely important to add loam and compost to enrich the soil; many experts suggest mixing equal parts of loam, sand and your original topsoil. You’re best off in the long run if you incorporate a slight slope to facilitate drainage and prevent pooling. Finally, use a roller to pack down the soil, then grade the area with a metal rake. Be as thorough as you can — remember, once you’ve put your seed or sod down, you can’t go back and regrade.

To Seed or Not to Seed

No question but rolling out a carpet of sod is the quickest way to a beautiful lawn. But sod can get expensive, especially if your lawn is going to cover a large area. The alternative is seeding the area yourself, either by hand or with a method called hydroseeding, which has recently become quite popular. Long used by farmers to sow large fields, hydroseeding solves one of the main problems of hand seeding: even dispersal of seeds. The grass seed — a mix of varieties blended for your climate and the type of use your lawn will get — is mixed into a pulp made from virgin wood fibers, fertilizer and binding agents.

Shave and a Haircut

When it comes to sharing lawn secrets, the first one on many garden experts’ lips is mowing height. “Most people mow their lawns way too short, which stresses out the grass,” says Paul James, host of Gardening by the Yard. The secret, he says, is do less, not more: “I’m a great believer in benign neglect.” He recommends raising the mower to the highest possible notch so you’re mowing only the top third of the grass when you cut. Taller grass promotes better root development, Paul says, as well as shading the ground so it doesn’t dry out as fast. An added benefit: the taller grass blocks the sun that weed seeds require to germinate. And don’t believe for a moment that leaving grass taller is going to mean mowing more often, says Gary. “There’s a big misunderstanding that a lot of people have that if they cut it shorter, they won’t have to mow it as often,” say Gary. “But that’s absolutely false; it renews itself so fast that it doesn’t save you any time.”

HUD’s Section 184 Program

Section 184 is Back!
Written by:Donna White
After a brief budget-related interruption in HUD’s Section 184 Program, the Native-American home loan guarantee program is back…and stronger than ever! Earlier this week, President Obama signed a budget agreement that effectively doubled HUD’s authority to guarantee the home mortgages of Native American borrowers – from $6 million to $12.2 million. This will allow the program to help as many as 3,500 Native American families to purchase a home or refinance their exist mortgage between now and September 30th. Section 184 is synonymous with homeownership in Indian Country because it guarantees 100 percent of the loan, which provides a great incentive for lenders to serve Native communities. Since the program guaranteed its first loan in 1996, it’s guaranteed more than 20,000 mortgages totaling $3.3 billion. Read more about HUD’s Section 184 Indian Home Loan Guarantee Program or call 1-800-561-5913 for help.

Home Prices Seen Making Stronger Gains in 2013

By Nick Timiraos

Many housing analysts underestimated the severity of the home price crash when the downturn began seven years ago. Now, many are racing to keep up with the current rebound.

Associated Press
At the start of the year, the conventional wisdom went something like this: home prices rose so much last year, they will probably have to cool down a bit in 2013. But the first three months of the year have shown the conditions that produced last year’s gains are just as strong — if not stronger — than last year.

The S&P/Case-Shiller index on Tuesday reported prices in January were up 8.1% from one year ago, up from a 6.8% annual gain in December.

Two analysts who have stayed ahead of the pack are among those upgrading their forecasts for 2013. Ivy Zelman, chief executive of research firm Zelman & Associates, said Wednesday she was now expecting prices to rise by 7% this year, up from earlier estimates of 6%, 5%, and 3%. Zelman was one of the first analysts to identify the turnaround in late 2011 and produced some of the most accurate housing forecasts last year.

She’s also calling for a 5% gain next year because she says the supply shortages and growing demand that fueled last year’s turnaround show no signs of easing. “The shortage of housing capacity continues to resonate,” Zelman said in a research note on Wednesday. “Just as deflation was a national headwind that stretched deeper into the economy than anyone would have imagined, we believe that appreciation can carry broad, positive implications for the consumer and economy beyond many expectations.”

John Burns, who runs a real-estate consulting firm in Irvine, Calif., is calling for a 9% gain in home prices this year, up from a 5% forecast late last year. The reason: strong investor demand and low interest rates that have boosted the purchasing power of buyers. Burns had similarly turned bullish on housing early last year.

The recent frenzy hit home for him when the woman cutting his hair last month said she and her husband wanted to invest in homes. “Here we go again,” he said.

A quarterly survey of more than 100 economists and housing forecasters last found that all but two expect prices to rise this year, with the average forecast of a 4.6% gain. Among those who have revised up their forecasts in the last month are analysts at Morgan Stanley, Bank of America, Capital Economics and J.P. Morgan, which have taken their forecasts to 6-8%, from earlier predictions of 3-6%.