Attention: Homebuyers – Tips for Improving Your Credit Score
A consumer’s financial life hinges on one primary factor . . . the credit score! Unfortunately, many American’s today are not well educated about how to begin a credit history and keep a high score. Let alone how to keep tabs on their credit each year and know the in’s and out’s of good credit management.
Checking Your Credit Score
Your credit report should be monitored annually at a minimum. You can visit AnnualCreditReport.com and receive a free report from each of the three national credit reporting companies (Equifax, Experian and TransUnion) each year. It is important to verify the accuracy of each of the reporting companies and, if you see any items that need attention, then you can deal with it rather than finding out while waiting to hear on a home loan approval (or any other credit application for that matter).
What does your credit score mean?
Excellent = Score range of 800+
Very Good = 750-800
Good = 700-750
Fair = 650-700
Bad = 600-650
Very Bad = Below 600
Here are a few simple tips to improve your credit score:
- Make sure to pay your bills on time, every time.
- Keep balances low.
- Don’t use more cards than you need.
What factors go into determining the credit score?
- How long you have had a credit history
- How much outstanding debt you currently have
- If bills are paid on time
- If new credit been applied for recently
- What types and how many credit accounts you have open
If you don’t currently have a credit card, you should consider applying for one. You don’t have to carry a balance or anything on it but it will help establish credit if you have little to no credit history. Make sure that you don’t rack up charges to the maximum credit limit. Most consultants recommend limiting charges to 30% or less of the card’s limit and 10% is preferred. The smaller the percentage of revolving credit that you have, the better your credit score is. Have one or two go-to cards that you use. Don’t charge $50 on one card, $80 on another and so on and so forth. This will help your credit and also be less bills to keep track of.
You and Your Credit
Your credit affects everything . . . from auto loans, credit cards to qualifying for a home mortgage. Not to mention other important elements such as insurance, employment and even rental housing. Therefore, your credit score is essential to be able to access new credit at reasonable rates.
The Great Recession
For many that were affected by the unemployment and foreclosure crisis that recently rocked our nation, a poor credit history is just one of the many side effects. Numbers show that over 8 million workers lost their jobs and over 4.5 million homes were foreclosed upon. This impacted may American’s credit reports. Whether it was a foreclosure, short sale or a loan modification, they each have a negative impact on one’s credit rating. For example, if you were the unfortunate victim of a foreclosure you may have seen your credit score decline by 250 to 280 points! Not to mention that negative mark stays on your credit report for 7 years. The good news is that if you pay your credit obligations and other bills on time, then within 3 years following the foreclosure your credit score will have improved and you can be considered for a new home mortgage.
While access to credit may be reduced due to a negative mark on the credit report, it also means that attaining credit comes at a much higher cost to the borrower. “Risk-based pricing” is available, but it comes at a premium. Credit scores are a lot like your driving record – violations, accidents and bad judgments just don’t disappear. Attention: Homebuyers – Tips for Improving Your Credit Score
“There are no second acts in American lives.” — F. Scott Fitzgerald
Blue Moon Realty Groupwe buy houses, Attention Homebuyers – Tips For Improving Your Credit Score