October 3rd, 2008
5 Steps to Get Your Credit Ready To Buy a Home
If you are thinking about buying a home in today’s market, it’s never been more important to make sure that your credit rating is going to be sufficient. Banks are closing their doors to many that are deemed to risky, and if you want to get an approval for your loan, you will need to have a credit score that will put a bank at ease. Let’s take a look at the steps you need to take before you apply for your home. We recommend starting these steps around six months before you apply for your home loan.
1. Know your credit score and monitor it throughout the whole period.
In order to know how a bank is going to view your application, you need to have the same information they use. Your credit score, is the main determinant that most banks will use to gauge your credit worthiness. This is not a stagnant score, so we do recommend checking it regularly to see what position you are in. The higher your credit score, the better your chances are of getting your home loan. Ideally, in today’s market, you should have a score of at least 700 or more.
2. Pull your credit report.
In order to see what is affecting your credit score, you’re going to need to get a copy of your current credit report. Every consumer is entitled to one free report every year from all three credit bureaus. You can access yours by visiting AnnualCreditReport.com. Once you have a better idea of what you’re working with, you can take steps to get your score up.
3. Correct any errors.
Simple errors or large errors can all be a detriment to your score. Read through your report carefully and contact the credit bureaus to fix any incorrect information if necessary. This may mean filing a dispute with them, and giving them 45 days to verify and correct the information. This can be done online, by phone or through the mail.
4. Pay down your credit card balances.
You don’t want to close your accounts, since this will actually lower your credit score in many cases, but you do want to free up as much available credit as possible. If you are carrying high balances on all of your cards, this is a sign to a bank that you are not a good risk. Make sure that you pay all of your bills on time.
5. Settle any outstanding issues.
We all forget about little bills here and there, but chances are, collection agencies haven’t. A collection on your report can have an enormous impact on your overall score, so these will need to be settled and removed before you proceed.
As you take these steps to fix your credit, by monitoring your credit score, you will be able to gauge your progress. Once you have your score up to an acceptable level across all three bureaus, getting a loan should be much easier.
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October 1st, 2008
What Does a Credit Score Really Mean?
Out of all of the credit related terms consumers have to deal with, a credit score may be one of the least understood. Credit scoring is a standard developed to help companies and banks determine overall risk. Your credit is important. A low score is considered to be a bad thing, while a high score, over 800, is considered to be ideal. Currently, the average American has a score that comes in right around 640, which is considered fair.
Your credit score can come between you and many things in life. Since this is the accepted standard for many companies, a low score means having to pay higher interest rates, if you can get a loan at all. It can also mean that you will have to pay higher deposits on phone bills, cellular phone plans and many other services. While this may not seem fair to the average consumer, it is done by companies to figure out whether or not they can rely on you to pay your bills on time.
Generally, those with a lower score have issues with paying their debts, or paying them on time. This indicates to companies and banks that the person is a high risk case and if they do decide to go ahead with the loan or service, they must protect themselves from that risk by charging more. It is an excepted practice, and can hamper the lives of many people.
Even a 640 score can be a detriment when it comes to getting a loan. This means that you are a moderate risk to a bank, and given the current state of the economic climate, that is too much risk for the average bank. It isn’t until you get your credit score up past 750 that getting a loan will be a breeze.
Knowing this, how can the average consumer work to get their credit score up to an acceptable level? The first step is to monitor your score on a regular basis. This can help you spot potential trouble signs before they get out of control. Errors are common on credit reports and in many cases, these errors can drag your score down.
The best way to keep a steady score is to keep paying your bills on time, every single month. Keep your balances low on your credit cards, and pay more than minimum payment. Closing your credit accounts is not recommended, since this can also lower your score, but you do want to free up your available credit as much as possible.
These simple steps can help you repair your credit score and help you raise it over time. Getting rid of collection accounts can have a dramatic effect on your credit score, as well as limiting how many new accounts you open. Smart money management however is the absolute key towards getting a great score and over time, the effort you have put in will pay you back with lower interest rates and a greater ability to get the loans you need.
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