Have you ever been awakened from a deep sleep by the nightmare of having forgotten to pay a monthly bill?
It’s a scary feeling!
If you’re like most of us, at one time or another, you may have had a derogatory
item applied to your credit report either by accident or oversight.
So, why would just one late payment cause anyone to lose sleep?
Believe it or not, one derogatory item can decrease your credit score by up to 60 points OR MORE!
Only 60 points. No big deal, right. WRONG!
So, how can losing just 60 credit score points affect you?
60 points could mean that you qualify for a mortgage loan versus not, being offered a 4.75% interest rate versus a 5.25% interest rate, or whether your next application for employment is accepted or rejected.
But since you pay your bills on time, losing 60 points from your credit score is no big concern, right?
I wouldn’t be so sure if I were you.
Contrary to what creditors would have us believe, we’re not alone in making mistakes.
In fact, a 2004 survey prepared by the US Public Interest Research Group, found that:
- 25% of credit reports contained errors serious enough to lead to a denial of credit
- 79% of reports contained mistakes of some kind
Not long ago, a friend of mine, who I helped with a home mortgage refinance, experienced the devastating effects of a Creditor mistake.
She noticed that her credit scores were much lower than anticipated when I emailed her a copy of her report.
For someone who has always been responsible with her credit, you can imagine her surprise at the 644 score staring back at her from the report.
Insulted, she called immediately to protest the scores.
Luckily, 8 years of helping friends like her with their home mortgages allowed me to quickly diagnose the problem.
Upon hearing my thoughts as to how the two ‘maxed out’ credit card accounts on her credit report were likely the cause of her 644 score, she excitedly explained that the balances for these accounts had been paid to zero some time ago.
She acted quickly on my advice to obtain written confirmation from the creditors that two balances had been paid to zero.
Then, we performed a rapid credit rescore, corrected the errors, and like magic, her middle credit score increased by 62 points to a 706!
Why is This Important?
The Mortgage Interest Rate available to her with a 706 score was 3/8% lower than it
would have been with her 644 score.
The lower rate will save her over $9,000 over a 10 year period and even more over
Unfortunately, many mortgage professionals do not know enough about credit scoring to identify problems or how to correct them.
Others do not care enough to do what’s best for their client.
In this case, without the knowledge, experience or desire to help her optimize her credit score, my friend would have missed out on thousands of dollars to pay for her child’s education, to care for a loved one in need or to donate to a charity.
Needless to say, she was VERY happy with her new interest rate and cash savings.
Her new 706 credit score should help her in gaining future employment as well as access to lower insurance premiums.
Would you, or someone you know, be interested in learning about how credit scores will affect a home mortgage interest rate or approval?
They could be a neighbor, child, co-worker, friend or family member.
Please reply to via email to email@example.com or call me at (504) 939-1704 if you’d like your own credit review or know of someone who we can help.