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Credit Ratings and FICO Scores

Last week I took a class hoping to gain additional knowledge to assist my clients with getting into a position to be able to purchase a home. And it worked. I learned A LOT!

I will just touch on the highlights here.

First, with so many people struggling right now it was interesting to learn the following…how long do life’s “mishaps” effect credit?

Credit accounts:

  • Accts paid as agreed remain for up to 10 years.
  • Accts not paid as agreed remain for 7 years.

Collection accounts:

  • Remain for 7 years from the original inception date of the collection

Public Records

  • Chapters 7 & 11 remain for 10 years from the date filed.
  • Chapter 13 –open or dismissed – remains for 10 years from the date filed.
  • Unpaid tax liens remain indefinitely.
  • Paid tax liens and judgments remain for up to 7 years from the release date

What is your credit score comprised of?

Payment history = 35%

Amount owed = 30% (80% is considered MAXED out or 100%)

Length of credit history – 15%

New credit = 10%

Types of credit in use (healthy mix) = 10%

The BIG question of the day however was how does a short sale affect a persons ability to obtain a new loan?

This the information we were given:


Deed-in-lieu of Foreclosure/Pre-Foreclosure/Short Sale

  • 2 years with a max 80% max LTV ratio
  • 4 years with a max 90% max LTV ratio
  • 7 years – LTV ratios per eligibility matrix at the time


  • Foreclosure – 3 years from completion date
  • Short Sale – 3 years from completion date. Per FHA’s Mortgagee Letter 09-52, FHA financing can be obtained in less that 3 years under certain conditions. As of now this means:
  1. No late payments in the last 12 months
  2. Valid reason for short selling such as divorce or relocation
  3. Must have been reported as paid in full at time of short sale agreement


No specific information has been issued on this yet but assume foreclosure rule of 2 years.

There was much more information given in this three hour class…maybe I will write another blog about it.

THANKS to Advantage Credit, Inc. ( for all of the good info. The instructor said they can get incorrect negative information removed in a matter of day and do a rescore to help borrowers get back in the homeownership game. And he indicated that a HUGE percentage of folks out there have errors on their report. ONE thirty day late can result in a 75-100 drop in scores! WOW!

If you are looking for a GREAT agent to help with your real estate need please give me a call at 602-504-3898 or 888-897-7821 x 114. Plus, I have a GREAT search tool on my web site that gives you the ability to search the entire MLS…just like agents do. Very COOL!  ;) Go to Metro Phoenix Homes and check it out! If you save even one home as a favorite, you will be prompted to enter contact information. If you do this…YOU can create and save as many searches as you would like. It is THE BEST MOST ACCURATE SEARCH OF OUR LOCAL MLS!!

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