1. Not All Credit Scores are Created Equal
When considering applying for a home loan, you want to make sure you check your credit report and score. FICO or Fair Isaac Corporation is the originator of the credit scoring model AND is the industry standard. There are many different type credit scoring models that have been developed over the years. A lot of these models are FREE to use and unfortunately DO NOT give an accurate score. The primary purpose of these sites is for marketing products to you.
2. Checking Your Credit Score
Checking your credit score should be part of your monthly routine. It doesn’t take much time to do AND is to important NOT to check regularly. When considering purchasing a new home, pulling your credit before you visit your local lender is always a good idea. This will help you to see if there are any issues that need to be addressed and can help eliminate any surprises.
When pulling your credit for review you want to avoid any FREE credit score sites and go directly to the source, Experian, TransUnion and Equifax. You can access one free report per year from each credit reporting agency by going to www.annualcreditreport.com. The free report that is provided DOES NOT include your credit scores, just the information that is reporting.
To see your score, you will have to pay a fee. Since you’re considering making a major purchase you should strongly consider paying to get your score. Having your 3 credit scores will help you to better understand what your current credit status is.
3. Your Credit Score Will Change
Rest assured, your credit score WILL fluctuate throughout the month. It’s not always bad if you’re doing the right things to prepare for a new home purchase. Paying down any credit card debt to 30% of the total allowable limit will improve your scores, while high utilization of your credit cards will lower your scores. Applying for any type of credit or financing whether approved or denied can lower your score. So, your credit score does move based on your habits.
When preparing for a home loan, it is important to minimize any activity that will lower your score. Start paying down any credit card debt you have. It’s not a bad idea to have a debt pay-off system in place to provide you with exact steps needed to shorten pay-off time frame and reduce your total debt load.
4. Lack of Credit
For first time homebuyers, especially for Millennials, you may have what’s referred to as a thin credit file. This can be an issue when applying for a home loan. The good news is there are ways to help with this issue by adding accounts like, secured credit cards or rental history. In some cases, this can BOOST the credit score rapidly. It’s always best to plan a head time because in other scenarios it could take a few months.
5. Challenged Credit
If you are considering purchasing a new home but have some credit dings, don’t be discouraged. It is estimated that approximately 50 Million Americans have less than a 601-credit score. For those of you that are not aware, this is considered a POOR credit score. What does that mean? This means you will NOT be approvable for a home loan, you will pay high interest rates for a car loan, in some case 20% PLUS. Your auto and homeowner’s insurance will be higher. You may not qualify for your dream job, EVERYTHING will cost you more besides missed opportunities! According to MSN.com, having a bad credit can cost you 200K up to 1 Million dollars over your lifetime.
If this is your situation, your primary goal should be to fix your credit! By fixing your credit you will open the door to opportunity! Homeownership, lower interest rates on auto loans and credit cards, lower premiums on home and auto insurance, saving you potentially hundreds of thousands of dollars!
The good news is, your credit can be restored. Unfortunately, the credit reporting agencies have made it very difficult and time consuming for consumers. Most people simple don’t have the knowledge, time or energy required to repair their credit. This is where a reputable company can be a tremendous help.
Employing a reputable company to handle the dispute process and provide the necessary tools and education can be extremely helpful. This can also help you get results quickly. This will also keep you motivated and encourage you to stay the course to achieve your goals.
Educating yourself on how credit works and what you can do to continuously increase your credit score is key for the long term. You must remember that your credit score will come into play many times over your lifetime. It is not a “one-time” event! Think about it, you will need and use your credit many times over your lifetime.
Many people believe that they must wait the time frames that are allocated by the credit reporting agencies for late payments, collections, charge-offs, tax liens, student loans, short sales and more. This is not necessarily true. The Fair Credit Reporting Act states that if an item being reported on your credit report is not 100% verifiable, it must be deleted. Again, this is where a reputable credit restoration program can help you leverage your rights.
If you’re considering buying a home this year the time to act is NOW! Don’t wait until the last minute, it will only take away for an experience that should be a fun memory for you and your family.
After reviewing your credit report and score you find that there are issues, here is a link that can help you understand how we can help you to improve your credit and get APPROVED for your home loan.
Go to Get GREAT Credit