Bad Credit? - Repair it here yourself!

There're many reasons you may want help for bad credit. We're here to help you understand what affects credit, what makes credit bad, how and what entities define your credit, guide you through the credit definitions, financial concepts, common misconceptions and provide you with information and tools that will help to solve your credit problems. Get help for bad credit now! To achieve this, we provide you with Free Access to a wealth of credit related content, forms, tools and calculators. We show you how to improve your bad credit step by step, reestablish your ability to borrow monies, how and where obtain loans, credit cards, mortgages and other financing. Repair Credit now!

Combination of FICO and greed is the real culprit of the mortgage mess

Fri Oct 5, 2007 12:10PM | By Tony

See more in Credit Repair | Permalink | Email | Comments (0)

You know what any mutual fund or other investment disclosure says - past performance doesn't guarantee future gains.

Forget about 'sub prime this', 'sub prime that', in the end, the sub prime mortgage will remain a sizable but not the dominant problem of the whole mortgage fiasco. The real problems lay with the greedy lenders which used artificially set FICO score limits to qualify and approve more borrowers, so more mortgages will be originated and sold numerous times, more homes built, more construction materials used and so on.

In the end, everyone was happy - banks, mortgage brokerage companies, home builders, every store and contractor selling and installing housing related items, everyone involved into buying process - from realtors and loan officers to appraisers and home inspectors to underwriters and home insurance agents.

There have been several FICO limits set, based on FICO algorithm which as far as we all know heavily relies on the past performance of the individual - PAST late payments, bankruptcies, collections, judgments and PAST history on how long accounts have been open and established.

It does looks at current debts, mainly into ratios between revolving account balance(s) and limit(s) which should be lower than 35 - 40%, so many borrowers didn't carry very high credit card balances when applied for a home loan, but once approved, literally maxed them out, getting into heavy credit card debt.

PAST credit performance doesn't guarantee future timely payments. As simple as that. So if you had credit score of 700 few years ago and could really afford a $200,000 house, but had to get that $400,000 home your girlfriend just bought, banks were ready to help, offering Stated Income and Stated Assets programs which basically allowed you to exaggerate your income and assets, within some limits of realm it was. Never mind that in few or several months, you realized that you couldn't afford those mortgage payments and heating bills and oops, those property taxes which were always going up. Repairs, new furniture, new kitchen, bathrooms, the works as they say, oops again - you previous 700 plus credit score meant nothing when you were simply out of your league.

On a contrary, many borrowers with not so good credit scores who had no choice but to verify their salaries and what little money they had saved, are able to keep their homes. Simply because they knew their limits and didn't have must-have attitude.

Sure sub prime mortgages did their share, but the same goes about so called conforming loans and anything in-between these two. Will be FICO system revamped, and/or Stated programs significantly curtailed? I doubt it. It is up to the individuals to think for themselves, but it is hard to fight must-have mentality when everyone around you blindly follows it.

Post a comment

Name:

Email:

URL:

Remember personal info?

Comments:

Please enter the code as seen in the image above to post your comment: