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Home Buying Wisdom Avoiding The Bad Credit Blues
pplying for a mortgage
loan only to find out you 1. Request your credit report.
have bad credit is a 2. Check your credit report for
surefire recipe for the home errors.
buying blues. After all, bad 3. Request your credit score.
credit will reduce the chance of 4. Find out where you stand.
getting a good interest rate, or 5. Work to improve your credit
maybe even prevent you from score, if necessary.
getting a loan altogether. What
could be worse than that? Now that we have a basic
blueprint for success, let's
But it doesn't have to be this examine each item in more detail.
way. You can avoid the home
buying blues by knowing your 1. Request your credit report.
credit situation, and (if
necessary) working to improve The first step in this process it
your credit score ... before to get copies of your credit
trying to buy a home. report. I say "copies," plural,
because you'll want to request a
The thing to realize is that copy of your credit report from
credit score improvements take Experian, Equifax and TransUnion,
time. It doesn't happen the three companies that maintain
overnight, not by any means. So credit reports. You can request
as soon as possible, you should all three credit reports at once
(A) find out what your credit by visiting
score is, and (B) work on www.AnnualCreditReport.com. This
improving it if necessary. website is maintained by all
three credit-reporting agencies.
Here are the steps needed to do
just that: 2. Check your credit report for
errors. 4. Find out where you stand.
That last thing you want is an Now that you have your credit
error in your credit report that score, you can determine where
actually lowers your credit you fall on the credit scale --
score. So review your credit great, good, average, below
reports closely for errors. Check average, or bad. Credit scores
the name and other admin info. range from 300 - 850, with 850
Also be on the lookout for any being the best and 300 being the
loans or other lines of credit worst. If your score is between
that aren't yours, as this could 800 and 850, count your lucky
be a sign of credit fraud. If you stars!
find an error, go to the website
of the company with the erroneous The average credit score in the
report and submit a request to U.S. is around 723. So anything
have it corrected. higher than that, and you're also
in good shape. Lower than 720,
3. Request your credit score. and you may want to work on
improving your credit score. You
When you order your credit won't necessarily have trouble
reports (previous step), they obtaining a loan with a score of
won't come with a score. You have 650 - 720, but you won't get the
to request that separately, and best rate either. If your score
the best place to do that is is at or below 600, you have some
through www.MyFICO.com. This work to do! That's our next item.
website also has a lot of helpful
information about credit scores, 5. Work to improve your credit
credit reports and related score.
topics.
The better your credit score, the
better your chances of getting a opposite is also true -- a
good interest rate on your history of late payments will
mortgage loan. With a lower hurt your score.
score, you will have to pay more
interest, which translates to a * Pay minimum balances, at least.
larger monthly payment each When you get a credit card bill,
month. Nobody wants that! always pay at least the minimum
amount that's due. Pay more than
So if you've determined that the minimum, if you can afford
you're on the "south" end of the to. This will reduce your balance
credit score, you'll want to work quicker and give you a more
on improving your credit. Here favorable debt-to-income ratio.
are some tips to help you do
that: * Don't apply for too many loans.
When you apply for credit too
* Pay down your bills. By paying often, you send the signal that
down credit card balances and you can't manage your finances
other signs of debt, you are properly.
improving your debt-to-income
ratio. Mortgage lenders prefer Taking charge of your credit will
your total debt to be no more make for a more enjoyable home
than 20% of your net monthly buying experience. When you have
income. If your overall debt is good credit, you can qualify for
more than 20% of your income, try a mortgage loan more easily, and
to pay it down as quickly as you'll likely have a better
possible. interest rate as well. But the
opposite is also true -- bad
* Pay all your bills on time. credit makes the whole process
Paying bills on time will raise more difficult, and often results
your credit score. But the in the home buying blues.
* You may republish this article
So check your credit score, find online if you retain the author's
out where you stand, and proceed byline and the active hyperlinks
accordingly to improve your below. Copyright 2007, Brandon
credit score. Don't delay ... Cornett.
start today!
About the Author:
For more information on bad credit mortgage loans, or to reach the author, visit http://www.homebuyinginstitute.com
Read more articles by: Brandon Cornett
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