Understanding Your Credit Report, How to Improve Your Credit, and How Your Credit Affects the Home Buying Process.
Where to start? Obtain your free credit report!
Raising your credit score can be easier than you think. There is a lot of different information available about how to improve your credit. Our goal is to provide you with reliable, trustworthy information about your credit score.
You can obtain a free credit report at this trusted source: www.annualcreditreport.com
In addition to obtaining and reviewing your credit report, the Federal Trade Commission has tools, tips, and articles that are designed to help consumers, such as disputing items that are not accurate.
How to build your FICO score.
Your FICO score is a 3-digit number between 300 and 850 that reflects your willingness to repay debt. This is known as your credit worthiness. The lower your score is, the riskier you are considered as a borrow. A higher FICO score could mean getting a lower interest rate, which will save you money over time.
Here are some quick tips for building your credit:
- Start small and pay your charges in full at the end of the month
- Pay your bills on time and keep charges well within your limit.
- Read your credit report regularly.
- Consider getting a secured credit card and after 6 months request a limit increase.
Quick ways to improve your credit score.
- Get a copy of your free annual credit report. Once you have the report scan it to look for any errors and accounts that you don’t recognize. If any errors show up you can dispute the mistakes online.
- Configure automatic bill payments. Most banks and services have automatic billing that you can set up online. It can be an easy way to stay on top of your monthly payments. Remember that payment history makes up 35% of your score.
- Make note of any late payments. If you missed payment on a bill you can call the creditor/company and ask for a goodwill adjustment.
- Try re-working this month’s budget to see how much extra cash you can put towards debt.
By working on your credit in short bursts you should see positive results over time.
What to do if you have no credit history?
It’s not as scary as you think to dive into the realm of credit. You can set yourself up for success by knowing what makes up your credit score and how to start building credit.
Your credit score is determined like this:
35% History of accounts paid on time
30% Amounts owed
15% Credit history length
10% opening up a new line of credit
10% Diversity of credit
Credit reporting errors can affect your score.
Even credit reporting agencies can make mistakes on your credit report that lead to a lower score. This is why it’s so important to stay on top of your credit.
You can easily check for errors on the free credit report that we chatted about above. If you find any errors on your account, the Federal Trade Commission’s website breaks down what you should do. Check it out here…
Good credit scores = good borrowing rates.
Credit scores do more than just determine what you would be approved for on a home loan. They also can impact whether you pay a higher or lower interest rate. The lower the interest rate, the lower the payment and the less you will end up paying over time.
This is another reason why it’s so important to attempt to improve your credit score as much as possible. By doing this, you will improve your chances of saving more money over the course of the life of the loan.
Your credit score and buying a home.
Your credit is a pretty big factor when applying for a mortgage. Remember to keep these factors in mind:
First of all, why do lenders use a credit score? Your credit score allows lenders to understand your financial stability in a unique way. It lays out your financial history and measures your dependability when it comes to paying back debts.
- Your score can determine more than just whether you are approved for a home loan. It can also impact whether you pay a higher or lower interest rate. Usually, if you have higher score you will save money because the interest rate is lower.
- It can actually be to your advantage if you were rejected because your score was too low. Think of it like this: you will be given information regarding the factors which negatively impacted you and ultimately led to the rejection. So now that you know what led to a low credit score you can work specifically on those problem areas to improve your score.
Thinking of a co-signer?
If you still need help to get approval for a loan, a co-signer might be an option worth pursuing. A co-signer is someone who will put their name on the mortgage (in addition to yours) to guarantee the debt will be paid if the primary borrower fails to do so. Ideally, a co-signer should have a strong credit history and a strong relationship with you. A parent or relative can be a good option.
There are many myths out there about your credit. Here are just a few we feel are the most common:
Myth: Checking my credit score costs money
Fact: You are entitled to a free copy of your credit report once a year. Just go to www.annualcreditreport.com
Myth: Checking my credit hurts my score
Fact: Personally checking your own credit doesn’t hurt your credit score. If you haven’t requested a copy of your credit report recently, it is important that you do so to better understand how you may improve your score.
Myth: I should just close out an old credit card
Fact: Canceling a credit card can actually hurt your credit score because it reduces the amount of available credit you have. A canceled credit card doesn’t even disappear from your credit report. Keep the accounts open & put the card in a safe place or properly dispose of it.
Building and maintaining your credit is an ongoing process that takes dedication and continuous monitoring. What takes years to build up can be easily be negatively affected by just a couple mishaps. Of course, these are not all the ways to help build and maintain your credit, but just an additional effort to ensure you are educated in every aspect of the home buying process. St. Louis Finest Homes Realty Group and our lending partners are committed to ensuring our clients are educated throughout the entire process.
Speak with one of our partnered lenders to talk more about your credit and get a custom game-plan towards home ownership! Click here!
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St. Louis Finest Homes Realty Group is not a credit repair expert. The items contained above were gathered from our lending partners and other trusted sources.