Romance and Credit Scores

In addition to getting the best employment and the lowest interest rate on everything financed, including credit cards, home and auto loans, the prime potential partners in the dating pool are quickly thinned of those with inferior credit.

This is clearly highlighted in a post made by the Credit Slips summary of a Washington Post article which examines the working paper recently published by the Federal Reserve titled Credit Scores and Committed Relationships.

Barron’s Market Watch recently published an article titled, Nearly 40% of Americans want to know your credit score before dating. In part, this phenomena was summarized by University of Kansas Communications Professor Jeffrey Hall who stated,

By showing an interest in these three digits, people are probably being smart rather than shallow, says Jeffrey Hall, associate professor of communications at the University of Kansas. “Finances, education, and job prospects all factor into the value of a potential mate,” he says. “Assuming that people can actually interpret a credit score meaningfully, it makes sense they would think a credit score is useful in evaluating mate value.”

“…In fact, the higher your credit score, the less likely you’ll separate from your partner — and a lower score often means you’ll be less lucky in love, researchers at the Federal Reserve Board, the Brookings Institution and UCLA recently concluded.”

Your credit score has become such a popular character-meter that there are dating services based on them. A 2015 academic study found that “quality in credit scores, measured at the time of relationship formation, are highly predictive of subsequent separations.” The research suggested “credit scores reveal an individual’s relationship skill and level of commitment.” How More Americans Are Getting a Perfect Credit Score Bloomberg Suzanne Woolley, August 14, 2017.

I think it’s safe to predict that more and more people in the dating pool will become savvy to the benefit of checking one’s credit score before entertaining the possibility of a committed relationship.

ConsumerAffairs February 9, 2020: Improving your credit score might improve your love life “…Other nuggets from the survey reveal that four out of ten people — both men and women — say irresponsible spending is a bigger turnoff than bad breath. Forty-six percent of people would break up over irresponsible spending, the second biggest reason behind cheating.”

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Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | Published November 13, 2015 – Updated August 16, 2017 – Updated February 9, 2020

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

The Chapter 13 Payment

That which matters is when your payment is posted to your account in the moth it is due. For example, if the payment is due in December, it must be posted in December.

While your Chapter 13 payments are not reported to the credit bureaus, when you apply for a mortgage (refinance or purchase) while in a Chapter 13 Plan or within two years of your bankruptcy Discharge, your Chapter 13 payment history will be reviewed by the underwriter. This review will consider your Chapter 13 payment with the same weight as a mortgage payment.  Just one 30-day late payment will disqualify an otherwise approvable loan applicant.

Exactly What Is A 30 Day Late Payment?

To illustrate, let’s say your payment is due on December 25th. Your payment has always been made on the 25^th. In fact, your November 25^th payment was received by the Trustee and posted in November as it was since your first payment. However, your December 25^th payment was not posted until January 2^nd. Oops, you now have a 30-day late payment.

The Payment Was Sent the Same Day as Always

We understand. However, the underwriting guidelines do not understand accidental, postal or electronic delays. Indeed, the system can be harsh. Being armed with this knowledge allows you to plan for the unexpected.

Rehabilitation Expectation – Minimum of 12 Months On-Time Payments

A minimum of twelve consecutive months of on-time payments immediately prior to applying for mortgage credit is essential for approval. This supposes that all payments have been posted on time with the Trustee’s office. However, there can be an exception of a 30-day late during the payment period so long as that isolated incident is not within the last twelve months. The exception of a 30-day late payment or an interruption of on-time monthly payments must be documented and sourced as completely outside the control of the debtor.

The Blizzard Made My Payment Late

A few years back, one of my prospective Chapter 13 home buyers diligently worked to get into a position to be approved for a new home loan. By way of background, at the time he lived in a cabin at St Mary’s Glacier. That year, there was a particularly severe snow event which left my prospective client snow-bound for several days. Still, his payment to the Trustee was only one day late. We argued that this was an Act of God and entirely out of my prospective client’s control. This held no sway with the underwriter and my prospective borrower was not approved. In the interest of full disclosure, this prospective client had another 30-day late payment about 15 months prior to the blizzard. The ‘Act of God’ defense might have worked had the previous late payment not been of record.

Automatic Bill Pay – Be Aware

Those of us that use on-line bill pay through our credit union or bank love the convenience. No stamps, no envelopes and no checks are but a few of the nice features. While in a Chapter 13 bankruptcy repayment plan, set your payment date early enough so there is sufficient time for the Trustee’s office to 1) receive your payment and 2) post your payment. Be aware of Federal holidays and back your payment date up a couple of extra days to make sure you never have a Chapter 13 late payment.

The Trustee’s Staff Said a Late Payment Is OK

We understand. While a single late Trustee payment (or two) will generally not cause for a Chapter 13 to be problematic or Dismissed, keep in mind, the Trustee is not your mortgage loan originator or mortgage lender.

The Trustee said it is ok do pay my Plan payments ahead of time. Talk to your attorney, this could be a problem.

What Is the Take Away of This Post?

For those with payments due to be in the Trustee’s office near the end of the month, we strongly suggest that you mail your payment a few days early every month to help ensure the payment is posted in a timely manner. Better yet, set the bankruptcy payment to be made via payroll deduction. If payroll deduction is not available, schedule an automatic monthly payment via your on-line banking.

Unpaid Mortgage Payments Can Cause a Discharge to be Denied

As discussed above, on time mortgage and Chapter 13 payments are essential to a successful plan. Let’s say one is nearing the final month or so of their Chapter 13 Payment Plan and the Trustee learns the mortgage payments, which were to have been paid outside the Chapter 13 Plan, were not paid as agreed. The Discharge can be denied and instead after all this time, the case is Dismissed. A Dismissed case is a failed Chapter 13 from a mortgage underwriting standpoint.

We wish you success with your Chapter 13 Payment Plan!

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Financially Speaking™  James Spray, RMLO, CNE, FICO Pro  | CO LMO 100008715 | NMLS 257365 |December 2, 2013 | Updated January 10, 2018 | Copyright 2013-2018

 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part provided you give complete attribution to James Spray.

Renting after Bankruptcy and/or Foreclosure

It’s a fact, many homeowners are being foreclosed leaving them to rent while recouping and rebuilding. Having a recent foreclosure can make renting hard because landlords fear you might have a problem paying rent or late paying the rent. Fortunately, you can still rent after a foreclosure and/or bankruptcy.  Many landlords are undeterred by foreclosed former homeowners as long as other types of credit are good. Many landlords will understand the need of a bankruptcy and such eliminated most other debt leaving the prospective tenant a lesser burden to pay the rent.

Still, you need to be selective on your prospective landlord, too. Follow the tips in this guide and you will certainly have your first line of defense against residential rental scams reasonably well covered.

Find No Credit Check Apartments and Houses

Large apartment complexes are typically owned by companies that have strict corporate approval criteria. Ask the manager if they exclude folks that have had a foreclosure or a recent bankruptcy. Again, you, too, need to do some screening of your potential landlord.

You’re more likely to get a credit check at one of these complexes (and denied if you have a foreclosure) so don’t apply where you know you are going to be denied. Why suffer the brain damage and humiliation?

Instead, look for houses, condos, townhomes, duplexes, and small apartment buildings that are owned by a single landlord. These types of landlords are less likely to do credit checks. Look for these types of residences:

• Check for signage by driving or walking the neighborhood you like.
• Ask friends and family. Ask social media friends.
• Check craigslist but be very careful as there is a great deal of fraud in this public arena. Here is a decent search engine which can verify the average price of rentals in different markets

Bring a Co-Signer

You can get approved for an apartment, even one of the larger apartment complexes, if you have a co-signer or guarantor. Keep in mind your co-signer will be responsible for any unpaid rent or damaged done to the apartment when you move out. I am one of those who refer to cosigning as financial ‘suicide by pen’.

Offer a Larger Deposit

Depending on the rental market conditions, offering a larger deposit could make your application more appealing to the management or landlord.

Purchase a Lease Guarantee Insurance Policy

On January 4, 2017, the Washington Post reported on a new business which underwrites an insurance policy guaranteeing the renter will pay the lease payments. The WAPO report is titled How to secure an apartment when you have bad credit. The subject of the report is a company named LeaseLock,

Keep Paying Your Other Bills

A foreclosure or bankruptcy might set you back, but it won’t ruin you, unless you let it. Continue paying your other bills. People with foreclosure often have more 90-day late pays to explain on their credit reports than those who haven’t gone through foreclosure. Those late payments make you even riskier in the eyes of a landlord. If you can prove to a landlord that defaulting on your mortgage was an isolated incident, you may be able to rent despite your foreclosure.

Rent To Own

Sounds too good to be true?

As I’ve previously written about this subject, this is very often a terrible idea. With very few exceptions, I have never seen a financially advantageous rent or lease to own contract. This is not to say they don’t exist. This is to say you need an experienced real estate attorney to review the document(s) for you prior to your entering such an agreement. I have seen back to back fraudulent lease-to-own situations. Use care, you do not need to buy someone elses problem unless it is good for you.

Don’t Lie

“Don’t ask, don’t tell” is a good philosophy to follow when it comes to renting after foreclosure. However, lying about it will probably cost you a rental opportunity. If you’re asked if you’ve ever had a foreclosure, be honest. Explain the situation and focus on how you’ve turned your finances around. Make sure the landlord understands that what caused the bankruptcy and/or foreclosure won’t cause you to be late on your rent.

Take a proactive stance by explaining your situation, be brief and forthright with the property owner or manager. You can also sign up for a service such as Transunion’s SmartMove . “Your credit rating is completely unaffected. The screening process is quick, easy—and all online. Only limited information is provided to the Landlord – your SSN and account numbers are not provided.”

Rental Payments and Credit Reporting

Rental Karma, a Denver based company since 2012 will report your rental payments to two of the three national Credit Reporting Agencies. A more recent addition to this arena is Phoenix based credit rent boost. They too report to TransUnion and Equifax.

As of June 2016, Experian RentBureau affiliated with Yardi, a real estate software solutions provider, to initiate an interface which will allow renters to build ‘credit’ history by having their rent payments reported. The converse is also true.

What You Can Expect to Pay

Landlords and tenants may use the free software provided by RentMetrics to get a sense of market rates by entering an area or an address and reviewing reasonably accurate pricing information of comparable units in the address’s neighborhood.

Better to Rent or Own?

I must start with the answer: It depends. It depends on your employment, income, goals, expectations and many financial factors not all of which are related to the cost of housing. How certain are you of your ability to earn the same or more money if your employer relocates or closes? What are the long term aspects of the housing market where you wish to live? On May of 2014, the New York Times published an article in The Upshot section which contains a very useful and easy calculator. This is the link to their Rent or Own calculator.

I am not paid by nor do I endorse any business or website referenced in my posts.

For Rent Image Credit

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Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | September 2, 2011 | Updated August 6, 2022

 

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Tenants In Foreclosed Properties May No Longer Lose Their Leases

Prior to May 20, 2009, most renters lost their leases upon foreclosure. The rule in most states was that if the mortgage was recorded before the lease was signed, a foreclosure wiped out the lease. This rule is known as first in time, first in right. Because most leases last no longer than a year, it is all too common for the mortgage to predate the lease and thereby destroy it upon foreclosure.

These rules changed dramatically on May 20, 2009, when President Obama signed the Protecting Tenants at Foreclosure Act of 2009. This little known legislation provided that leases would survive a foreclosure — meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days’ notice before having to move out.

In reality, this does not translate to the responsible tenant now living rent free. Rent should now to be paid to the foreclosing financial institution. Do not expect this to be understood by all parties. In fact, you will need legal counsel to make this work in your favor. Fear not, this is both manageable and affordable.

In Colorado and several other states, official notice of a foreclosure is both mailed to the occupant of the property with a separate notice posted on the property being foreclosed. Tenants receiving such notice are advised to seek legal assistance on at least two fronts.

The first reason for getting legal help is to avoid being evicted by a landlord that attempts to continue to collect rent on the property being foreclosed. Second to set up a trust account with the attorney so you can “continue” paying your rent on behalf of the proper party. The attorney can help you establish your track record of responsibility on behalf of your mortgage and lease credit. While this will not report on your credit it will allow you to document to third parties that you continued to pay your lease on a timely basis.

I suggest the tenant to discuss their options with a Real Estate attorney. If your attorney is not aware of the Protecting Tenants at Foreclosure Act of 2009, send them this blog. While on this subject, hiring an attorney is ever most likely far less expensive than the cost of moving and setting up a new lease.

As exerpted from this article, PTFA Has Given Tenants More Options When Facing Eviction: “Tenants who are facing foreclosure and are protected under PTFA have more options than they did before. PTFA, like much of today’s housing regulation, was created in response to the mortgage crisis of 2008. It was set to expire at the end of 2012 but the expiration date was extended to December 31, 2014 due to the passage of the Dodd-Frank Reform Act in 2010.”

UPDATE: Congress Permanently Authorizes the Protecting Tenants at Foreclosure Act – May 24, 2018. For more information, click here.

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 Financially Speaking – James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 / NMLS 257365 | January 28, 2011 | Updated September 18, 2014 | Updated: April 10, 2019

 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Credit Score Facts

 

Am I a Fact or a Myth

 

Myth – The more money you have or earn the better your credit scores.

Fact – One can be incredibly wealthy or high paid and still have not good credit scores. Your credit scores do not reflect your income or assets. Your credit scores reflect your wise use and management of credit or not.

Myth – Cell phone, cable and Internet companies all regularly report payments to the credit bureaus.

Fact – They only time you can count on these service providers to report to credit bureaus is when you do not pay them.

Myth – Marrying someone with lower credit scores than yours will lower your own credit scores.

Fact – That is simply not true. What is accurate is that if you open new joint credit accounts which are not paid on time or become abused this will reflect against both of your scores. This is simply co-signing for debt or as we call it committing financial “suicide by pen.”

Myth – Credit has nothing to do with your relationships or love life.

Fact – A good credit score is now considered sexy and bad credit can break a romance.

Myth – Your credit history is erased when you file bankruptcy. This is part of your Fresh Start in life.

Fact – When you file bankruptcy your creditors are to list your account as being in bankruptcy. Most creditor history is shown on your credit reports for 7 years. In the case of bankruptcy it can show for up to 10 years. In the case of judgments not discharged in bankruptcy these may show for up to 20 years. Errors can be corrected or deleted from your credit reports.

Myth – Creditors always play fair and credit reports report correct information only.

Fact – There are those creditors that simply do not play fair. The key rules for playing in the creditor and debt collection sandbox are the Fair Credit Reporting Act (FCRA), the Fair and Accurate Credit Transactions Act (FACTA) and the Fair Debt Collections Practices Act (FDCPA). The sandbox monitors are consumer protection attorneys. Yes, a consumer is empowered by the Federal Trade Commission to correct errors but has almost no chance against the creditors or credit reporting agencies. Use great caution when doing this as you can do more yourself harm than good with a wrongly worded argument.  Keep the Miranda Warning, so to speak, in mind as you write as anything you say can and will be used against you.

Myth – There are incorrect addresses listed on my credit report and this is why my scores are so low.

Fact – These are simply clerical errors and do not reflect on your credit score whatsoever. Verily these are a nuisance but it may be more trouble to prove you never lived at a certain address than it’s worth in the time and energy invested. If you wish to dispute the errors, I suggest you read Credit Repair Basics.

Myth – All credit inquiries reflect against your credit score.

Fact – That is simply not true. The Social Security Administration has a great explanation for ‘soft’ credit inquiries: “Soft inquiries do not affect your credit score, and you do not incur any charges related to them. Soft inquiries are displayed in the version of the credit profile viewable only to consumers and are not reported to lenders. The soft inquiry will not appear on your credit report from Equifax or Transunion [or Experian], and will generally be removed from your credit report after 25 months.”

Myth – Cable/internet, utilities and cell phone accounts are regularly reported to credit bureaus.

Fact – These type of accounts are not regularly reported to the credit bureaus. The only time they are reported is when collection activity begins after payments haven’t been made.

Myth – All credit scoring companies are the same as are the scores they provide.

Fact – Companies that sell credit scores do not sell credit scores used by most lenders. See FICO or FAKO Scores?.

Myth – It’s fine to run a high credit utilization each month as long as you payoff the entire balance at the end of month.

Fact – On credit utilization anyone who uses credit cards could have high utilization, particularly those which pay off their balances in full each month. This is because balances are often reported to the credit bureaus mid-billing cycle. So if you have a $5,000 limit and you charge $4,000 in a month, you could be reportedly utilizing 80% of your available credit. The result is most often dramatically reduced FICO™ Scores.

As always do not hesitate to write back with comments or questions.  I read everything that comes back, even though I don’t always get a chance to respond as quickly as I would like.

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Financially Speaking™ James Spray, RMLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365 | November 7, 2010 | Rev. April 3, 2014

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

FICO or FAKO Scores?

FAKO scores are not  used by your mortgage lender

What’s the difference between FICO™ Scores and the ‘free’ credit scores advertised on the Internet and television? The short answer is that lenders (especially home loan lenders) use only FICO_™ Scores to evaluate your credit. The advertised FAKO sites are a waste of both your time and money and they may put your private information at risk. Consider this as you think of the fake scores, would you want a watch that only gave you the approximate time? Would you trust a banker that let anyone buy your private information?

There are three national credit repositories known as credit reporting agencies. TransUnion, Equifax and Experian. All are for profit corporations. All have an agenda which is to sell you a subscription to something you truly do not need. They wish to sell you, among other things, access to useless monitoring services and FAKO scores. Lenders do not use FAKO scores.

There is a big difference. As reported by the Consumer Finance Protection Bureau, Buyer Beware!

FICO™ or FAKO Scores

Question: From which of these sites can you obtain FICO™ Mortgage Scores?

freecreditreport.com	freecreditscore.com	consumerinfo.com
creditexpert.com	freescoreonline.com	equifax.com
experian.com	transunion.com	truecredit.com
truelink.com	creditkarma.com	creditsesame.com
quizzle.com	creditsesame.com	creditreport.com
creditchecktotal.com	creditprofinity.com	thinkcreditreport.com

Answer: This is a trick question. None of the above sites provide FICO™ Mortgage Scores. These are all what I call FAKO Scores. Note: This list is not complete.

Similar to FAKO Scores

What does FICO_™ stand for? FICO_™ is the company originally known as the Fair Issac Company which developed the mathematical models to predict credit behavior based on current and past credit usage. This company is as protective of their proprietary information as is Coca Cola of its formula.

You can obtain a free copy of your credit reports annually by logging onto this government created site free annual credit report. While these reports contain the information on your credit reports, they do not contain your FICO_™  Scores. To obtain your FICO_™ Scores, you will need to purchase your FICO_™ Scores as explained below.

How can you get a copy of my credit report with the mortgage FICO_™ Scores? You can get a copy of  all three of your mortgage FICO_™ Scores with the error codes (very important) from only one place – your favorite mortgage loan originator (banker or broker); they may not mark up the price you pay for the tri-merged reports including your FICO_™ Scores. The company myFICO can provide access to all three FICO_™ Scores however it is quite likely that these will not be the same version of FICO™ Scores as used by mortgage lenders. The fact is that mortgage lenders use your middle FICO™ Score. This leaves you with the risk of not knowing where you stand until your mortgage professional pulls your tri-merged credit report.

The marketers of the generic scores are almost as good at marketing as the bottlers of “brand name” tap water.

You can you get an idea of what your FICO_™ Scores are without spending any money? The short answer is FICO_™ Scores are not free. You can, however, use the FICO_™ Score simulator to get a good idea of what your FICO_™ Score range. I preface this with a word of caution; the FICO_™ simulator will act as any computer program, in other words garbage-in = garbage-out. The free FICO Score Estimator will give you a fair idea of your FICO™ Score range.

In September 2012 the Consumer Finance Protection Bureau released a 42 page report explaining in great academic detail much of what I touched on in this blog. Twice now, CBS 60 Minutes has reported on the situation of ego scores vs. the scores lenders use.

Be aware of the data miners which are, through these type of services, tracking what you are doing regarding credit. All of the above are data miners and will obtain Non-Public Personal Information (NPPI) from you. Are you sure their business is hacker proof? The Federal Trade Commission found that at least one of these business exposed NPPI. Do you want them to have your Social Security Number and other personal information for life?

On to reality, I strongly urge you to read this brief post to learn how it is the FICO Score is built. Knowing this and understanding how to interpret this information is your key to rapidly building and maintaining a good credit score and be on the way to building a great credit score.

January 3, 2017, HOUSINGWIRE News CFPB fines TransUnion and Equifax for deceiving consumers with their marketing

• Deceiving consumers about the value of the credit scores they sold: In their advertising, TransUnion and Equifax falsely represented that the credit scores they marketed and provided to consumers were the same scores lenders typically use to make credit decisions. In fact, the scores sold by TransUnion and Equifax were not typically used by lenders to make those decisions.
• Deceiving consumers into enrolling in subscription programs:  In their advertising, TransUnion and Equifax falsely claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only “$1.” In reality, consumers who signed up received a free trial of seven or 30 days, after which they were automatically enrolled in a subscription program. Unless they cancelled during the trial period, consumers were charged a recurring fee – usually $16 or more per month. This billing structure, known as a “negative option,” was not clearly and conspicuously disclosed to consumers.

HOUSINGWIRE News  February 10, 2017, “VantageScores are no substitute for FICO Scores”.

HOUSINGWIRE News March 23, 2017,”CFPB fines Experian $3 million for lying about consumers’ credit scores. Told consumers that purchased credit scores were same ones that lenders used.”

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Financially Speaking™ James Spray, CNE, RMLO, FICO Pro

CO LMO 100008715 | NMLS 257365 | September 18, 2010 | Revised March 23, 2017

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

 

 

Inherited Credit: How to Increase Your FICO Scores in 30 Days

 

Inherit Good Credit From Family Members who Provide your Birthday to the Creditor

MYTH – You can’t inherit or piggyback on another’s FICO scores.

FACT – Yes, you can inherit or piggyback a family member with good FICO scores. This is known as an authorized user (AU). You can also inherit credit scores from a family member with bad credit so be aware.

Effective no later than June 8, 2018, a credit reporting agency (CRA) will only report an AU if the birthday of the AU is provided to the CRA by the creditor.

Background: There was a time, recent and short lived that this credit activity was banned by FICO. It did not take long for their scientists to invent a new scoring formula based on Inherited Credit.  The reason this activity was banned was due to abuse. Greed driven individuals franchised their credit scores to strangers for predatory fees. This presented a problem for lenders.

With the FICO 08 model (introduced in 2009), inherited credit is now limited to family members related by blood or marriage. For example a mother or father could allow their children to piggyback on their good credit as the offspring establish their own credit. In the converse, a child may piggyback siblings, mom or dad to help them reestablish credit after a catastrophic credit event.

There is virtually no risk to the credit owner. As such you only list your relative as an AU, you can do this by phone. You do not grant the AU access to your credit cards – just your good credit. You will need your relative’s social security number, date of birth, present address, etc. Again, you are at no risk as you are only allowing your relative to use your credit not your credit cards.

Again for the credit owner, you are at no risk of your FICO Scores being damaged by allowing an Authorized User to piggyback on your good credit. You are not authorizing your relative to be a Joint Account holder on your credit; one is merely an Authorized User with no access to use the credit.

For the one inheriting credit, you need to know the relative you are asking to let you piggy back on their credit has very good credit. By this I mean they have at least a FICO Score of 720. Inherited credit is a double edged sword, if your relative does not have high scores, this method is of no benefit for you. If your sponsoring family member runs into a credit catastrophe, you will no longer wish to be an Authorized User on their accounts. It will take a month for the Authorized User status to be extinguished on your credit reports.

Finally, you should understand that method will do little good for getting approved for major credit as this will only help improve your credit scores, it will not improve, alter or age your credit history.

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 Financially Speaking™ James Spray, RMLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365 | August 2, 2010 | Updated February 17, 2018

 

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information.