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Improve Your Credit Score with North Shore Advisory

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 Factors the Fico Score Uses to Determine Risk Level     
 

 Do You Have Any Credit Questions?

Ask Tracy!
Tracy Becker
President
155 White Plains Road
Suite 200
Tarrytown, NY 10591
(914) 524-8300
(914) 524-5014

914-524-8300

 

 

Call Now for a FREE Credit Education Seminar 

 

As banking professionals it is important to educate current or potential applicants, referral sources, and your customer base on the factors that affect a successful closing. Since banks have raised their thresholds for what is average, good, and great credit, many transactions have either failed due to lowered credit scoresor consumers wind up paying much higher premiums for loan approval. When borrowers learn they may pay over $100,000 to $500,000 more, and in some cases millions, for a loan due to lower credit scores they realize how important knowledge of credit and the value of great scores can be. If an applicant is borrowing $700,000 through a Fannie Mae loan and they have a 660 to 739 Fico score they may have to come up with $19,250 in points at closing (a point is 1% of the loan) or pay a 5% interest rate over the loan term. If the buyer had a 740 plus Fico credit score they would not have to pay any points and the rate could be 4%.

 

Let’s say they don’t have the additional $19,250 to buy the rate down that extra 1% what would happen?

 

Buyer A has a 660 credit score and pays 5% interest on the $700,000 loan. Over 30 years the cost would be $1,352,796.

 

Buyer B has a 740 plus credit score and pays a 4% interest rate on the $700,000 loan. Over 30 years it will cost him $1,203,094.

 

THE SAVINGS WOULD BE  $149,702!!

 

Most consumers would be very happy to have a banking professional who prompts them early on to check and improve their credit so they can have the opportunity to enjoy these huge savings.    

 

To have great credit scores we must understand the factors that the Fico formula uses to tabulate a score:

 

1.            Payment History

2.            Amount of debt

3.            Length of credit history

4.            New credit

5.            Types of credit used

 

 

Today we will focus on payment history and the next four Newsletters we publish will focus on each of the other factors. Payment history weighs heavily on Fico credit scores. Since a bank may be supplying a borrower with hundreds of thousands of dollars, possibly millions, it is crucial to know how that applicant has managed his payments in the past with other creditors, as the past is a great indication of what the future might hold. When the lender views the credit scores and reports they can see the payment history for what could be a 7-50 year period depending on the age of the applicant. Negative information which includes late payments, judgments, tax liens, collection accounts, charge offs, repossessions, settlements, short sales, foreclosures, child support, debt consolidation programs, and some loan modifications can remain on credit for up to 7 years and in some cases (including bankruptcy) even longer. Although most negative information remains on credit for 7 years from the date it occurs what happens in the past 2-4 years has the greatest impact.

 

Here is an example:

 

John had a bankruptcy five years ago and enough time has gone by for him to be eligible for loan approval. He has been working hard with us over the past few years to clean up his credit and build good history. John has four excellent credit card accounts he opened four years ago and his current Fico score is a 720. John will be approved for a loan at a 5% interest rate.

 

Lisa is getting ready to purchase a property in NYC and will need loan approval for over a million dollars. When asked by the realtor how her credit scores were she stated, “They should be great”. The realtor suggested Lisa meet with a banker to get a pre-approval letter so they can begin shopping for a property. Lisa meets with the banker and is shocked to find out that her FICO score was a 650. Lisa had a thirty day late payment last month with a credit card for $15.00. Although Lisa was on time with all her other accounts, because the late payment occurred so recently her credit score dropped 90 points. She was amazed to find out it is not the amount of the late payment that affects the credit but the timing of when it happens. While Lisa earns over $500,000 a year and has great savings and investments, it didn’t matter much to her score, as her credit is only showing the bank what her payment patterns are. The score cares little if the late payment was $15 or $50,000. Lisa cannot even get loan approval with this poor credit score.

 

Luckily for Lisa we were able to remove the late payment from her credit and she will be ready to get approved once she finds the right property. Lisa was fortunate to learn early on in the process that her score needed work and we were able to help her.

 

New negative credit is much more damaging to credit scores since it has to reflect to the score that this consumer is a much higher risk borrower. Since statistics show that the majority of consumers with new late payments and delinquencies wind up defaulting, the score has to reflect the new higher risk category to the lender. How it works is the higher your credit score the more it has to dip after a delinquency to reflect the risk change. For example, with an already poor Fico score at 590, a new late payment might drop the score an additional 10-15 points; whereas, an exceptional 780 Fico score would have to drop 100 points to bring the risk level up substantially. A 680 is the lower end of good. So it is very possible that a consumer with a bankruptcy 5 years ago can have a better score than one with new late payments.

 

Feel free to call us with any questions or feedback on credit challenged clients or credit in general!

 

In two weeks we will discuss AMOUNT OF DEBT and how it affects credit scores.

 

 

Making sure credit is analyzed with future financial goals in mind is a MUST before taking an action that can foil those plans and limit a consumers options for a better quality financial life. 

Why you need a Blog | Bedford Realtor

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Blogs. Certainly you have heard of a blog, but many people still don’t know what they are and why they are useful. In this article, I am going to explain what a blog is, why you need one, and how they can make you and your company a lot more money. Almost for free.

Wikipedia gives this definition:

A Blog (web log) is a website where entries are written in chronological order and displayed in reverse chronological order. “Blog” can also be used as a verb, meaning to maintain or add content to a blog. Blogs provide commentary or news on a particular subject such as food, politics, or local news; some function as more personal online diaries. A typical blog combines text, images, and links to other blogs, web pages, and other media related to its topic. The ability for readers to leave comments in an interactive format is an important part of many blogs. Most blogs are primarily textual, although some focus on art (artlog), photographs (photoblog), sketchblog, videos (vlog), music (MP3 blog), or audio (podcasting), and are part of a wider network of social media.

Like all online tools and applications, blogs started out as a tool and a toy for geeks. If you look at email, forums, html, and now blogs, they were all used by geeks for some time before businesses found a way to monetize them. Blogs have fairly recently become the next online tool to become indispensable to businesses.

Blogs started as VERY simple online applications for posting online diaries. Those diaries were used as personal diaries, political activists, amateur news reporters, and for anyone that needed a soapbox. Today, that has all changed, and with this article I’ll show you some of the reasons why blogs need to be a necessary part of your online marketing.

Blogs are different from forums
A blog is not a forum. This is a bit of a pet peve of mine, because I constantly hear people calling forums “blogs” all the time. When you post on a forum, you are not necessarily a “blogger” either. Forums are discussion web sites for discussing topics with a group of people. Forums are better than email listserves because the discussions are searchable, and they persist much longer than discussions in an email list. The main difference between a blog and a forum is that the main content in a blogs is written by an individual, small group, or company, and in the case of a forum, content is written from visitors to the forum. Since posts to a blog generally start from the inside of the group, the content is always relevant to the subject matter of the blog web site. Forums, on the other hand, allow posting from generally anyone that signs up and participates. This makes forums a real challenge to moderate and maintain, because people can discuss anything they want to. When you are trying to create a massive community around a demographic, then you want a forum. When you want to market the expertise of your company or small group, then you want a blog.
Benefits of a Blog

  • Increased sales
  • You become known as an expert in your field
  • They get more traffic from search engines
  • They get traffic from next-generation social networking search engines (like technorati.com)
  • News agencies are more likely to do a story on your business
  • Real-life stories and tips warm up your web presence
  • Educating customers on how to be a better customer helps your business run better
  • You can update your blog on your own without your webmaster’s help
  • Helps build communication between departments that are posting to the blog

Blogs are rewarded handsomely by search engines

Search engines recognize blogs in several ways. At the most basic level, they naturally crawl them like any other web site, indexing the content n them. In this way, a blog provides your company with a second web site, which can cross-link to your main web site. If your company has only one web site, this can help. But blog software tends to be very optimized for search engines out of the box. As long as you are entering meaningful articles that contain your keywords, text links, and categories, then you should get most of these benefits automatically. Blog software typically generates nice page titles, text link titles, and search engine safe URLs. All of these Search Engine Optimization (SEO) tricks make your blog get noticed by search engines.

Blogs are Free

You can create a blog in minutes online for free using sites like Blogger.com. This has eliminated all barriers to creating blogs online. As you can see, this blog you are reading is not a blog on Blogger.com I don’t choose to use Blogger because It is a hosted application, and I can’t extend it like I can WordPress. WordPress is also free, but you will need a host for your blog. Naturally, Delaware.Net hosts blogs, so you can contact us about that. But the point of this article is not to sell you blog hosting. The purpose is to educate you so that you can realize the benefits of blogging for your business.
Blog content density is better than your web site’s
Since blogs are typically written by real people sharing tips, they are full of content that search engines can consume. In contrast, a corporate site might have lots of forms and other necessary pages that tend to water-down the overall content value of your site. Having a bloated site makes it harder for your web pages to come up in search engines without creating specific content that exists just for search engines, like putting big paragraphs of keywords on your site. People tend to get turned off when they see that garbage content, and they don’t trust the sites that have it in them. Blogs don’t need to resort to this, as long as they have enough articles in them.

Web standards help blogs
There is a lot of talk about using web standards in the web design industry, and blog software today uses many of these standards. For example, blogs can be skinned with new graphics very easily because they use CSS heavily.
Sample uses for your company’s blog

* Create a how-to section – these tend to get attention from search engines
* As a replacement for a static news article on your company home page
* Warn customers of possible problems that they could have with products/services in your industry
* Use the blog as an ask the expert section of your web site
* Tell customers about new products and services
* Link to related articles and web content from your blog

Who SHOULD have a a blog

* Anyone that is a trusted advisor to their clients
* Anyone that has written articles or tips that are designed to educate their clients
* Anyone that gets privileged access to services or products
* A person that is in support, or who fixes problems for a living
* Employees that believe in (and are allowed to) be open about their methods
* Any professional that has extensive training and/or experience on a subject
* Companies that need a way to share their victories and tell stories about their projects
* A senior professional that is willing to share lessons that they have learned

Who SHOULD NOT have a blog

* Unenthusiastic employees
* A CEO that does not wish to share
* A worker that punches the clock and who doesn’t care about community
* Someone that has terrible grammar and can’t write
* Someone that sees blogging as a chore

Blogs represent a part of the next-generation of search engines because they are a part of the user-driven, user cataloged part of the Internet known commonly as Web 2.0

Folksonomy – its probably not a word that you have heard before, but this simple concept helps to unlock the theories of social networking, social bookmarking, and it also explains how blogs are changing the way people search the Internet for content. If a taxonomy is the formal process of categorizing and naming things, a folksonomy is the democratic categorizing and naming of Internet content that is done by people when they categorize photos in Flickr, and when they categorize their blog posts, and when the describe links that they post onto Digg.com, etc. This social behavior change in how people categorize and rank internet content is essentially building a NEW SEARCH ENGINE that adds a piece to the puzzle that Google really doesn’t provide.

Folksonomies help drive Web 2.0
Every time someone posts a video to YouTube, others can comment on it. They can rank it. They can help make it more popular because the number of times a video is watched is also tracked. Below is a great video that explains how this is affecting the way people use the Internet to get and publish data, and how that interaction is being harnessed to allow people to collaborate.

Blogs can also be modified to take advantage of social bookmarking. By implementing plugins that take advantage of social bookmarking sites like Digg.com, Del.icio.us, furl, reddit, and other sites, it is possible to spread the word about our new blog posts quickly, but you have to start the ball rolling on you own. This can make things a little more time consuming, but it is worth it.

via johnmckown.com