Credit repair companies have long been the enemies of the credit reporting agencies. Their tactics account for a significant amount of time and manpower investigating disputes.
In my world - as a consumer advocate and educator — credit repair companies make my job more challenging. So many people think that if they are willing to spend enough money they can erase their bad credit. Usually it’s not true, but there are exceptions.
One way that credit repair has flourished has been through “piggybacking” or “rented tradelines.” This scheme involves adding someone with bad credit to an account of someone with good credit. When done right, the person with bad credit will benefit from a “good account” listed on their credit reports. Piggybacking can quickly boost a credit score more than 30 points, depending on the borrower’s credit history.
But because it has been used to artificially improve credit scores so that borrowers can get mortgages, the credit agencies and Fair Isaac (FICO) have been working hard to eliminate this loophole. It’s not completely gone as a score-enhancing tactic, but it is dying. A recent New York Times article reports on the use of these “seasoned tradelines” as a credit boosting technique.
Buying a good tradeline doesn’t come cheap — it may cost you roughly $1400 or so for the first one, and several grand for the next ones.
I understand how some people who have been through terrible credit problems are lured by the promise of quick and easy credit fixes. But in this case, it is truly not worth it. As the Times article points out, this is a clear case of credit fraud. If your mortgage loan goes bad and you were found to use one of these schemes, you could find yourself with far greater problems than a poor credit score.
Save yourself some money and grief. Read my tips for building stronger credit and get to work.
Question we received: “I was offered a no-fee loan by Bank of America. The promised interest rate was 5.2% for a 30 year fixed, with 5% down. I was approved based on my great credit. The entire process was complete except underwriting. The underwriter claims that because the property is a log home that it is not qualified for a no fee mortgage! However, it is qualified for a loan with higher interest rate.
My question is does that sound right to you? I’ve asked other loan officers and they have never heard of anything like it before.”
Answer: The team at LenderRateMatch has scrutinizes pages and pages of loan guidelines every day to make sure our loan searches remain as accurate and up to date as possible. (Makes my head spin, but thankfully they’re great at it!) As you point out with your question, it’s those little details that make or break a deal.
So I posed your question to them, and here is what they had to say:
“Log homes, unless they are in a vacation area with lots of log homes, are considered a higher risk factor for the lender. First, there may be no “comps” (comparable properties for an appraisal) and second, reselling the property if it is foreclosed upon can be a problem. Many lenders don’t even write these types of loans. Our suggestion is this, regardless of whether the property IS or IS NOT in a vacation area, go to a lender in a vacation area that is familiar with this type of property for your loan. Make sure the loan officer actually does log home loans, don’t let one just tell you not to worry about it.”
And I’ll add my 2 cents — always compare a no-fee loan with one at par rate using the FreeRateSearch.com home loan search engine. No-fee loans are made at an interest rate that is high enough to roll the fees into the loan. Depending on how long you’ll be paying on the loan, you may be better off with a lower rate loan that also carries closing costs. And if cash is the issue, see if you can’t get the seller to contribute to closing costs or an interest rate buydown. It is a buyer’s market!
With all the news about rate cuts recently, home loan borrowers may be wondering what it means to them. For some it’s good news, others won’t see an impact.
Here’s an excellent post that describes how the rate cuts may affect your loan. If you have an adjustable rate, you’ll need to know what index your loan is tied to. Don’t know? Ask your lender.
If you’ve been thinking of refinancing or buying, now is the time. In this crazy economy, you want to take advantage of a good thing when you see it!
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