Most conventional real estate lenders require a minimum FICO score of 620. FHA loans with a 3.5% down payment require a minimum score of 580. FHA requires a minimum score of 500 to 579 with 10% down, depending on other factors. Most VA lenders require a minimum score of 580 with no money down.

Following are ways to improve your FICO score:

• Pay your bills on time. Six months of on-time payments are required to see a significant difference in your score.
• Increase your credit line. If you have credit card accounts, call and inquire about a credit increase. If granted, it is important not to spend the increased amount so that you maintain a low credit utilization percentage.
• Do not close a credit card account. If you are not using a certain credit card, it is better to stop using it instead of closing the account. Depending on the age and credit limit of a card, it can hurt your credit score if you close the account.

Another alternative that works includes obtaining one or more secured credit cards that report all activity to the major credit reporting agencies. By doing this, paying timely, and maintaining a low balance not in excess of 30% usage, credit scores can be enhanced.

Credit card holders should be aware that credit card issuers have the right to close inactive accounts or accounts that are not used regularly. If this happens, it can affect a debtor's overall utilization rate even if their overall use of credit does not charge. The fact that a debtor's utilization rate increases will by itself reduce his or her FICO Score. Consequently, it is important to use credit cards sufficiently, so they are not closed.

Individuals and companies that are concerned about their credit should be aware of the ChexSystems network which is composed of member financial institutions that regularly contribute financial data on mishandled checking and savings accounts among members to help them determine whether an individual or company is creditworthy.

Negative credit can do more than prevent someone from obtaining credit or forcing a borrower to pay a higher interest rate. Bad credit can cost an applicant for a job to be rejected. Approximately half of all employers in the United States now run credit checks and routinely reject applicants with poor credit. Not all information on a credit report is available to employers. Employers must obtain an applicant's consent to check their credit.

 

 

VantageScore

VantageScore is a credit scoring model used by many lenders and lessors to assess an applicant's creditworthiness. It was developed in 2006 by the three major credit bureaus, Equifax, Experian, and TransUnion, as an alternative to FICO. VantageScore has a scoring range from 300 to 850 which is similar to FICO. Both VantageScore and FICO produce reliable indicators of creditworthiness.

 

 

Private Money - Private Money Lenders

 

Private money refers to loans made to individuals, companies, and other entities by non-institutional individuals or private lenders. These loans normally carry higher interest rates than institutional loans made by banks, credit unions, and insurance companies because these institutional lenders generally have more stringent underwriting requirements. Private money lenders generally rely more on the asset value of collateral and less on the credit rating and/or the cash flow or income of the borrower.

 

Lending Circles

 

Creating and participating in a lending circle is a way to establish and enhance the credit score of each participating member. This assumes the organization provides the required reports to one or more credit reporting agencies. A lending circle exists when each member of a group contributes a fixed amount of money each month into a pool. After a certain number of months, one person collects the entire pool. The pool is replenished and the pooling of funds continues. The recipient rotates. No interest is paid on the contributions or payouts. Participants' timely payments can be reported helping them to build a positive credit history. Lending circles are utilized mostly by people needing to improve their credit scores, new immigrants with no credit history, and young people just getting started.

 

Credit Circles - Credit Information Sharing

 

A credit circle is created when members of a common group come together to share information on credit related matters of the clients or customers, such as late payments or defaults. Credit circles help businesses minimize risk and prevent losses. Many apartment associations have sponsored credit circles where apartment building owners and property managers report their experience with tenants.