Checking Your Credit Before Buying a Home
Whether you are a first-time home-buyer or if you are a seasoned vet moving up or down (or out of town!), there are several things you must know before you start looking. The most important being whether or not you can get the financing you need to purchase a home. There are several factors that play into your qualifications, but one of the most important and often overlooked is you credit score. Many buyers don’t realize that just having the funds is not good enough anymore. Lenders want to know that you are “credit worthy” and will pay your bills.
Before you apply for financing check your credit reports and scores. You can save yourself a lot of heartache going into this process prepared.
Once a year consumers can check all three of their credit reports for free (truly free, no gimmicks) through AnnualCreditReport.com. Through this one site you can access your credit reports from Experian, Transunion, and Equifax. Since you are requesting it yourself, it does not affect your credit score, where using companies who offer free credit scores and reports will actually decrease your credit points. Even though your credit reports are free, your scores are not. However, each credit bureau will give you the opportunity to purchase your credit score through them during this process. This also should not affect your score. (If you do buy them, you’ll need all three. Lenders will take the “middle” score)
Even if you don’t splurge and purchase your scores, you can still adequately prepare yourself to apply for a mortgage. Here are two key points to check on your credit report:
1) Make sure all the account information is correct. If you find any inaccuracies, report it to the appropriate bureau immediately.
2) Make sure all the accounts are yours. You would be surprised to know how often information is incorrectly reported to the wrong accounts Especially if you have a common name, or share a family name as a Sr., Jr., III, and so on.
If you need to improve your score, there are several things you can do to start improving it. Once you have verified the information on your report is yours and is accurate, following these steps to start improving your FICO Score. (Please note that I am not a credit expert, and these are just tips that my clients have used to improve their scores in the past. They may or may not work for every credit profile. If you need assistance, contact a professional)
1) DO NOT open any new lines of credit. This includes, but is not limited to, store cards, financing furniture, buying a car.
2) DISPUTE! If you find any discrepancies on your credit reports, or if you have collections or delinquencies that are more than 7 years old, have them removed for your report.
3) Get current, and STAY current. This should go without saying, but if you are behind on payments get yourself caught up and pay your bills on time. A late payment reported to the credit bureaus can decrease your credit score dramatically.
4) DON’T close you credit accounts. Especially accounts you have had for a long time. No credit and little credit can be just as detrimental to your FICO score as having bad credit.
5) Pay your credit down, not necessarily off. If you have high balances, pay them down to 30% of the available credit or less.
6) Use your card, and then pay it off. Your FICO score is an indicator of how responsible you are with credit. If you never use your cards, the creditors don’t know how reliable you are with credit accounts.
7) OPT-OUT. If you need a few bonus points, you can opt out of receiving credit offers through this site: www.optoutprescreen.com. This is reported to the credit bureaus and may increase your score by a few points!
Don’t fret if you have bad credit. It may take some time, but improving your score is not impossible. For more ways to improve your score visit MyFico.com.
If you are thinking about buying a home in the Shreveport-Bossier City Area please contact me, and I will send you a Home Buyer’s guide for free!