The Credit Application Score

How to Complete a Credit Application and Skyrocket Your Chances for Approval

Did you know that most vehicle loan and mortgage applications have what is called a "Credit Application Score"? These scores are used by the loan underwriter. So what you disclose or don't disclose on a credit application can make all the difference.

Let me give you an example. Let's say you are self employed and you apply for a mortgage and being the truthful person you are, you disclose that on the application for credit. That disclosure could prevent you from getting approved, or it could increase the cost of the loan.

Now, to get around having to disclose you are self employed or an independent contractor, form a Limited Liability Corporation (LLC), and then ELECT to be treated as an “S” corporation. Banks will look more favorably on employed status unless you can show substantial net income verified by tax returns.

By doing this you will actually get a paycheck from your own LLC with taxes deducted. Therefore, you can truthfully tell the bank you are employed because according to the IRS, those who are paid by an S Corp are employed by the S Corp.

This procedure is simple and quick (less than an hour). Simply complete IRS Form 8832 and send it to IRS by Certified Mail. Make a copy of the form and keep it for your records because the IRS has been known to lose these forms.

Here's another example. If you filed for bankruptcy, and the credit application asks if you ever filed for bankruptcy, there are two ways to answer this question:

1. If you filed in the last 10 years, skip over the question. Don't answer it. If the lender wants more information, you can give it to them. However, with most applications for car credit, the lender is going to find out anyway when they review your credit reports, and if they have more questions, they can ask you.

2. If you filed for bankruptcy more than 10 years ago, it does not appear on your credit report. In my opinion, the question itself is unfair and prejudicial. Look, if you're 55 years old, and you filed for bankruptcy when you were 30 years old, is it fair that you're forced to answer this question so it could be held against you? Therefore, I would answer "No" and write, "Not in the last 10 years" on the application. 

Credit really is important, and that's why Faith Law Firm helps clients with credit after the bad debt has been eliminated or brought under control. 800 659 0525.

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