I know you’re aware how important your credit score is.
You’ve heard it numerous times. The higher your score, the lower interest rates on loans, credit cards, and mortgages. Landlords are checking credit scores to determine who to rent to. Employers are as well to determine who to hire.
So the question you should be asking before you searching to buying a home is…
How is My Credit?
Despite the importance of credit, many people don’t know where they stand. Annually, only one in five consumers checks their credit report, which is a history of your track record of borrowing and repaying banks, credit card companies, and any other lenders.
When you don’t regularly review your credit score, you may be surprised on what it is included. You may see an old bill that you forgot to pay. Consequently, it could’ve gone into collection and is now showing up on your report.
Old bills such as utility bills from past residences and overdue medical fees can become a problem. These old bills may lower your credit score. That can cost you when it is time to apply for a home mortgage.
Review, Review, Review
It takes time to build good credit. That’s why it’s important that you do what it takes to maintain good credit.
It begins with checking your credit reports regularly. Go to AnnualCreditReport.com, where you can get one free credit report per year from each agency (TransUnion, Experian and Equifax). You can get these with no strings attached (unlike other credit report services).
Look over your report carefully as you may find errors. Be sure to look for credit card accounts that aren’t yours, and delinquent payments that were paid on time.
Huge errors on your credit report can result in a lower score. A credit score is a number that measures your credit risk based on the information in your credit report.
The most commonly used credit scoring system is produced by the Fair Isaac Corp (FICO). FICO scores range from 300 to 850. The higher the score, the better borrower you are perceived to be.
Generally, FICO scores fall along the following lines:
300-629: Bad credit
630-689: Average credit
690-719: Good credit
720 and up: Excellent credit
In case you’re wondering, the average FICO score was 695, according to the latest data as of April 2015.
A big mistake or several errors could result in you being denied credit altogether. So if your find errors, notify your creditors or financial institutions and report them to the credit bureaus right away.
Get Paid Up
Delinquent accounts have the biggest negative impact on your score, because your payment history accounts for a whopping 35 percent of your credit score. Make sure you pay those off in full.
You can also try negotiating a payment plan with your creditor or collections agency. Then, write to your credit agencies to make sure the settled account is reflected in your report. Old delinquencies, by law, will fall off your credit report after seven years.
Thinking about buying a home and have questions about your credit score? Click here to contact me and I’ll be happy to answer your questions.