Financing and Your Credit Score
Credit is an important component in helping you find the best loan product to meet your home-buying needs. The way you handle credit obligations can greatly affect your loan choices and the interest rates you can get. In short, the better your credit, the more loan options you will have when choosing what’s best for you and your financial goals.
If you’re in the market to buy a home, and you want to make sure you’re doing everything you can to maintain good credit, here are a few tips:
- DO pay what you owe – regularly and on time.
- DON’T skip payments.
- DO have a checking and a savings account.
- DON’T hold more than four credit cards.
- DO sign up for automatic payroll deposit with your employer.
- DO keep your total debt-to-income ratio under 36 percent.
- DON’T exceed or continually increase your line of credit.
- DO keep track of your spending and stay within your budget.
- DON’T continually open and close accounts; maintain a constant profile.
Your lender will view your credit report when determining which loan products are best for you. Using your credit history, the credit bureau will develop a credit score. The higher your credit score, the more likely you are to qualify for a loan with the best interest rates and product features.
Not sure where you stand?
It’s wise to obtain a copy of your credit report at least once a year in order to find your FICO score. You can obtain your report for free once a year from each of the three major credit bureaus at www.annualcreditreport.com. It’s especially important to figure your score before making a large purchase, like a house or a car, in order to review for accuracy and find out how you can work on improving it, if necessary.
In that report, you’ll see the consumer credit given to you over the past seven years and be able to check your highest balance and current balance on outstanding debt, as well as see details about on-time and late payments and collections. Your home mortgage consultant should be able to help you better understand what your score means.
You can get your credit report from many sources, but should you find something in your report that may be inaccurate, only the credit agencies can actually correct the data on your report. Contact the three major credit agencies directly:
Equifax: (800) 685-1111 or www.equifax.com
Experian: (888) 397-3742 or www.experian.com
TransUnion: (800) 916-8800 or www.transunion.com
As for less-than-perfect credit, you should know that lenders typically are more concerned with how you’ve handled your recent credit than with what happened years ago. But even if you have a blemish on your credit history, don’t let that stop you from buying a home. Buying a home – and paying your mortgage on time each month – is a great way to rebuild your credit.
If you’ve got credit questions, your first step should be to contact us. We can help you navigate the process each step of the way.
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