Your credit score and what it can mean for you when it comes time to purchase a home.

What is a credit score?

   Credit scores, or FICO scores as they are also known as, are numbers that are assigned to you based on your credit history. FICO is short for Fair Isaac and Company.  The information that is used in determining your FICO score comes from a variety of places including the major credit bureaus, credit card companies, banks and other financial institutions where you have loans. A credit score is sort of like an adult version of a report card. It tracks your performance in incurring debt and paying your bills on time. 

 Improving your credit score can make obtaining a mortgage easier.

   If you are thinking about purchasing a new home now or in the future it is never to early to start thinking about your credit score. Your ability or lack there of to obtain a home loan will rely  greatly on this. The higher you credit score, the easier it is to obtain a mortgage. Now this is not to say that with an average rating score that you will not be able to qualify, however it is most likely going to cost you more in the long run.  So you ask what can I do to bring up my score or if it is already high keep it that way?  

1. The first and most important step is to pay your bills on time. The credit agencies look at your past history. Someone who has made payments on time in the past is most likely to continue to pay on time. Even if you have not been on time in the past it is a great time to start. Credit agencies look at the most recent history.

 2. Pay any past due accounts. This will not increase your score immediatlely, however it will keep it from continuing to go lower.

 3. Request to have your credit limits increased. I know this sounds a bit strange, but the optimal level is to be at or below 50% of your credit limit.

 4. If you carry more than one credit card, be sure to pay off the balances on the ones with the higher interest rates first.

 5. During the home loan process do not apply for any new credit. Your score can be negatively affected if you have more than 2 inquiries into your credit within a specific time period

 6. Make sure your credit records are accurate. It is important to contact each of the 3 reporting agencies (Equifac, Trans Union, Experian) at least once a year, to check their accuracy. Your score can vary slighly between the three agencies. You don't want to wait until you are applying for a home loan to find out something has been recoreded incorrectly as it can take time to make the necessary corrections.

 Equifax

Phone: 1-800-685-1111

www.equifax.com

 Trans Union

Phone: 1-800-888-4213

www.tuc.com

 Experian

1-800-682-7654

www.experian.com

 What should  you do if you feel there is incorrect data on your report?

 Dispute it. If your report is inaccurate, you should dispute the inaccurate information. In many cases you can do this online at the credit reporting agency’s website. The credit reporting agency is required by law to investigate all disputes, and the entity that reported the information must respond to the dispute within a limited time to prove that the data in the report is correct. If you are unable to resolve the dispute in your favor you can add a permanent statement to your report stating the nature of the dispute and identifying the inaccurate information. The credit agencies are required by law to include this in your report. 
  

What is a good credit score?

  • 720 and above: Excellent credit and will likely be eligible to receive a lender’s most favorable rates
  • 675 to 719: Average. Once your credit score dips below 720, you may no longer be approved for the lender’s best rate, it could cost you as much as .5 percent more to obtain the same loan as a person with excellent credit.
  • 620 to 674: Below-average credit score, could potentially cost you up to 2 percent more for a loan
  • Below 620: Sub prime rating. This could cost you 3 pecent more to obtain a loan.

  As you can see what your score is can have a significant impact on your ability to purchase a home. If you do not have good credit it is never to early to start, simply follow some of the steps above and you will begin to see an increase in your score. Please keep in mind this will not happen over night, but most of the worlds greatest accomplishments took time!!