As your real estate agent, I will work with you throughout the entire home buying process - from helping you obtain and review your credit reports to providing helpful hints on qualifying for a mortgage- so you'll be ready to buy the home you select.
If you're planning to look for and buy a home any time soon, my recommendation is that you look very carefully at your credit score.
CREDIT RECORD
Your credit record demonstrates how well you've handled credit in the past and how you use it right now: Your credit record is kept electronically by the following private companies, or "national credit repositories": Equifax, Experian and Trans Union
CREDIT REPORT
A credit report is a listing of the information in your credit record at any one of these companies. It lists your debts and payment history with people and companies who have loaned you money under an arrangement to pay it back, such as banks, credit card companies, and department stores. It shows when you pay your bills (whether you pay bills on time)and how much you pay (whether you pay the proper amounts due). Your credit report also shows any history of tax liens or bankruptcies, even if any of these happened several years ago.
CREDIT SCORE
A credit score is a statistical way of predicting how likely it is that you will pay back a loan that might be made to you.
The lender you choose will get a credit score as part of your credit report. A credit score is a computer-generated number that provides a snapshot of how likely you are to repay your debts. The credit score is calculated by analyzing all the pieces of information in your credit record and summarizing them in a number.
FICO SCORE
The most commonly used credit score today is known as a FICO score. Developed by Fair, Isaac & Co. Inc., the FICO score is a mathematical way to look at factors in your credit report that may affect your ability and willingness to repay a debt.
FICO FACTORS
These factors can include your record of repaying loans, e.g., student loans, car loans and credit card bills; any public records you might have, like tax liens and bankruptcies; how often you apply for installment loans and new credit cards; and how much you actually owe. For example, if you charge up to the limit on your credit cards- even if combined they don't seem to add up to a lot of money- this might hurt your credit score. Or, if you have recently applied for several credit cards, including department store payment plans, bank credit cards or finance company accounts- even if you haven't begun to use them yet- your credit score might be negatively affected. However, if you show a pattern of managing your credit widely, such as keeping credit card balances low or paying your bills on time consistently, your credit score will be positively affected.
YOUR CREDIT SCORE IS IMPORTANT!
It is important to understand how significant your credit record is to getting a mortgage loan to buy your home. Your credit score will be used- along with your credit report and other information from your loan application- to determine whether you will get the financing to buy your home. Your credit score may also be used to determine the interest rate you get on your mortgage.
CREDIT REPORT ERRORS
If you believe your credit reports contain any mistakes and you wish to dispute or change the mistake, contact the national repository that developed the report. Under Fair Credit Reporting Act (FCRA), the repository must complete an investigation of your disputed items within 30 days and provide you written notice of the results of the investigation within five days of its completion, including a copy of your credit report if it has changed based upon the dispute.
The Federal Trade Commission (FTC) is responsible for enforcing FCRA. The FTC also publishes consumer-related credit brochures where you can obtain additional information on credit reports. To contact the FTC:
Federal Trade Commission
Public Reference Branch
6th & Pennsylvania Avenue, N.W.
Washington, D.C. 20850
Phone: (202)326-2222
www.ftc.gov/ftc/consumer.htm
www.ftc.gov/ftc/moreinfo.htm
THREE RULES OF THUMB
Be smart about your credit and follow these three rules to learn how to manage your credit wisely:
1) Pay your bills on time.
This is the single most important thing you can do.
How you've paid your bills in the past is usually the best indicator of how you'll pay in the future. Be sure to pay at least the minimum amount required by the date it is due on your account statement or invoice. You can always pay more, but you should never pay less than the minimum.
2)Keep credit balances low.
Don't apply for too many loans or credit cards. This might be interpreted as a sign that you can easily get in over your head on payments you owe. Don't charge as much as your credit limits allow you to charge. Think about closing down accounts you never use and try to keep credit card balances low on your remaining credit lines.
Remember, though that it is good for you to use credit because it demonstrates your ability and willingness to pay your bills. You must have some credit history to have a credit score. If you rarely or never borrow money or use a credit card, consider applying for a few credit cards and using them carefully, paying off the debt each month. But keep your overall debt at a reasonable level relative to your income.
3)Make sure your credit records are accurate and protect them.
It's important that you review your credit reposrts from each of the three private companies- Equifax, Experian and Trans Union- at least once a year to make sure they are right. Your credit record, and therefore, your credit report may vary from one company to the other.
You don't want your credit score or mortgage application to be based on incorrect information in any of your reports. Simply contact all three companies that report on your credit, listed below. If you've been denied credit, you can get your credit report for free by following instructions in the written notice you recieved denying you credit. Otherwise, you can receive a copy for a minimal fee.
Equifax
Credit Information Services
1(800)685-1111
www.equifax.com
Experian
National Consumer Assistance Center
1(800)682-7654
www.experian.com
Trans Union
National Disclosure Center
1(800)888-4213
www.tuc.com
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