5 Credit Score Tips for Homebuyers

How will my Credit Score affect My Mortgage?

Now that you are interested in purchasing a home of your own, it is also a good time to review your credit score via your credit report, checking it closely for correctness. If you are married, you and your spouse will have separate credit files that contain much of the same information.

You will need to have a good credit rating to buy a home, but it does not have to be perfect.

There are different ways credit scores can affect a mortgage. The type of loan and amount of down payment will dictate what your credit score (FICO Score) needs to be.

Your credit rating is the history of money you have borrowed and repaid. There are 40 FICO score reporting models, and it is important to note Mortgage FICO Scores are not the same as credit scores used for a car loan.

A mortgage lender’s decision to approve a loan application is primarily based on credit, so it’s important to have a good credit rating. If you have not borrowed and repaid money, you will not have a credit history rating at all.

You may be able to show your ability to make timely payments using nontraditional credit references like rent, utilities, childcare, child support and other large recurring payments to show the lender that you make your payments on time.

WHAT'S a CREDIT REPORT AND WHERE DO I GET A COPY?

WHY SHOULD I OBTAIN A COPY OF MY CREDIT REPORT?

Mainly this is to avoid surprises.

Errors on credit reports are not uncommon and they can be corrected by contacting the creditor. You can save time by reviewing your credit report for accuracy before you apply for a mortgage loan.

WHAT IF I HAVE A POOR CREDIT HISTORY?

If you have a poor credit history, consider contacting our favorite credit repair company CreditSecurityGroup.com. No one can unconditionally guarantee to clean up your credit and that you will qualify for a loan.

Under the Fair Credit Reporting Act, credit repair companies cannot do anything that you cannot do for yourself at little or no cost. Although errors on your credit report can be corrected, a poor credit history cannot be erased. It is understanding how to help yourself and your credit that is important.

Your credit report can be improved over time by doing the following:

• Consistently pay your bills on time
• Keep your overall debt at a reasonable level, relative to your income
• Actively and responsibly use credit cards

5 Things Not to Do when you're Trying to Improve your CREDIT SCORE

One of our credit repair partners thought it would be helpful to provide you with a list of things to avoid when trying to improve your credit scores. It is usually beneficial to try to avoid doing any of these 5 things:

1. Don't pay off collections or "Charge Offs". If you want to pay off old accounts, do it through escrow, making sure that the debt is yours. Request a "letter of deletion" from the creditor.
2. Don't close credit card accounts or it may appear that your debt ratio has gone up. It also affects other factors in the score, including credit history.
3. Don't max out or over charge credit card accounts. Keep your balances below 40% of their limit during the process. Pay down balances if possible.
4. Don't consolidate your debt. When you consolidate all your debt onto one or two credit cards, it will appear that you are "maxed out" on that card and you will be penalized.
5. Don't do anything that will cause a red flag to be raised by the scoring system. This includes adding new accounts, co-signing on a loan, or changing your name or address with the bureaus.

If you have any questions please don't hesitate to contact us.