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Need
to improve your credit score?
Here are 9 ways to get started. |
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Credit scores, along with your overall
income and debt ratio, are
the two biggest factors that will determine if
- and at what terms you’ll
be able to qualify for a mortgage. |
1. Correct
any and all errors in your credit report.
Are you paying for someone else’s poor financial
management? Check you credit report for mistakes. A new Federal law allows
you to receive a free
copy of your credit report once in every 12 month period from each of the three
reporting agencies. To get your free annual report, go to
www.annualcreditreport.com.
2. Pay off
or pay down credit
cards.
Here's the deal. If you can manage it, pay off the entire balance every month
- but never, never miss or be late with, at least, the minimum payment.
Also, don't transfer debt from one credit card to another - it could lower
your score. Cancel all credit cards that you don't use. Having credit
available to you on several cards, believe it or not, is considered risky to
a mortgage lender (see #6 below).
3. Stay
well within the limits of your credit.
Don’t max out any cards. Work hard to bring down the
balances on the cards with significant sums of debt first.
4. Patience is a virtue.
We know it's hard but wait at least 12 months after any credit difficulties to apply for a mortgage. You’re
penalized less for old problems than for new ones.
5. Think
before you buy.
You've just been approved for a loan? Congratulations - but don't
grab your credit cards and go out and start buying big-ticket items for your new home.
Wait until
after the loan transaction is closed. Your loan underwriters will run
another credit check just before you close. You may lose the loan you
thought you had if you use your credit cards to buy all kinds of cool stuff
for your new home, and your credit score is now lower
as a result of increased debt.
6. New credit
is bad.
Having too much available credit can lower
your score. Although this seems like a contradiction, your
loan underwriters are afraid you might actually go out and use it - running up
such high
debt that you won't be able to repay your mortgage loan.
But wait!
Don't consolidate cards just to rid yourself of
credit cards either.
Your credit score will be lowered if you come close to "maxing out" the
credit limit of any card. Transferring all your debt to one card may
come close to reaching the limit of that card.
7. Take
care when shopping for mortgage rates.
Too many credit applications can
lower your score, but multiple inquiries from the same type of lender are
counted as one inquiry if submitted over a short period of time.
8. Steer
clear of finance
companies.
This applies especially to "pay check" loans.
Even if you pay the loan on time, the interest is high
and it will probably be considered a sign of poor
money management.
9.
Take better care of
your money.
Do you know where your money is going? If not
- find out fast and take control.
MY FINANCIAL HOUSE – Personal Finance Software™
is a free software program enabling you to
take an inventory of your financial situation
and track progress towards your financial
goals.
Further Reading:
This information is copyrighted by the
Fannie Mae Foundation and is used with permission of the Fannie Mae
Foundation. To obtain a complete copy of the publication, “Knowing and
Understanding Your Credit,” visit
http://www.homebuyingguide.org.
Reprinted from REALTOR®
Magazine Online
by permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2005. All rights reserved.
www.REALTOR.org/realtormag
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