October 18, 2017

Is very Important to Boost Your Credit Score


Buying a home is one of the most important purchases most people will ever make. The average homeowner will make hundreds of mortgage payments over their lifetime, and since interest rates (and ultimately payments) are determined by one’s credit score, one can save thousands of dollars over the course of a lifetime simply by having the best credit score possible when purchasing a home.
But suppose from past history, you fear that your credit isn’t so great. What should you do, before you buy that first home? How can you boost your credit score?
First step, several months before you are ready to buy a home, order a free copy of your credit report from any of the three credit bureaus ( Equifax, Experian , and TransUnion ). You can also get a free credit report using a site like Creditkarma.com or
When you get your credit report, scrutinize it carefully to make certain that everything on it is correct. Mistakes are made and you could have someone else’s bad credit on your report. Or it’s possible that a loan or credit card that you paid off satisfactorily was never reported to the credit bureaus. It’s also possible to be the victim of credit fraud, whereby someone else has used your name and social security number to open a line of credit, and then never paid any of the bills.
If you see anything that doesn’t look right, you have the right to dispute your credit report, and it can be done online at all of the credit bureau websites. Let the bureau know what information is wrong, show them proof if possible, and request that they delete or correct the misinformation on the report. You should also write to the creditor to let them know you are disputing the information provided to the credit bureau.
Even if the information on the credit report is accurate, do not be discouraged by having a negative credit issue in the past. It may not bring your score down as much as you think, and the further in the past it occurred, the less impact it will have on your current score.
Even people with past bankruptcies, judgments, and foreclosures can still qualify for a loan- if a good amount of time has now passed and if the more recent credit history is immaculate. After seven years, most all negative items will have disappeared entirely from your credit report.
But keep in mind that credit scores do not move higher overnight. It can take several months to push a score higher, so if owning a home is in your future, take these important steps now.
The most important way to boost your credit score is by making all payments on time, whether it’s a car loan, student loan, credit card statement, or even your monthly rent. If you are the type that procrastinates with paying your bills, set up your bills for automatic payments from your bank account. You can also put “bill pay reminders” on your smart phone or computer. Start making all payments on time TODAY.
Next, pay off any small debts completely, rather than having multiple accounts open where you owe small amounts on all of them. For example, if you owed $200 on one account, it would be better for your credit score to pay it off in full than to pay $50 down on four different accounts.
Similarly, do not charge small amounts on multiple cards. It is better to just use one or two cards, and pay off the small amounts on all others.
Do not cancel any credit cards, especially those with a long history of timely payments. Those are your best credit boosters. However, it’s good to use cash and maintain low or zero credit card balances in the months before you apply for a mortgage. You want a low ratio of debt owed to the limit amount on the card. A high debt to limit ratio will negatively impact your score, while a low ratio improves your score.
As a last resort, you could apply for a higher credit limit as a way of improving your debt to limit ratio. But this is dangerous for anyone who has a history of maxing out their credit limits, because if you max out the new higher limit, you will lower your score even more.
Unfortunately, debit cards, which a lot of younger people use today, do not affect your credit score, because they are tied to your existing account and do not create good use of credit.
When you finally apply for a mortgage, it’s a good idea to shop around, but do it within a short period of time. Your credit score will not drop if you make multiple applications for a loan within a few weeks of each other.
Almost all lending institutions use the FICO (Fair Isaac and Company) score to determine your mortgage loan eligibility. FICO has created a page at myfico.com to teach how to repair your credit and improve your FICO score.
Even if you have no credit history, and thus no FICO credit score, you can still qualify for an FHA loan by paying your rent every month for a year or longer with a check or money order. Keep all of your receipts whenever you make a rent payment. FHA will also look at utility, cell phone, and insurance payments to help you qualify for a loan.
Remember to start your credit improvement process several months before you are ready to buy a home. Most Realtors will demand that you be pre-qualified for a loan, because if you can’t get a loan, it makes no sense to be out shopping the market. You certainly can improve your score, but it will take time and definitely some self-discipline on your part.
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