You finally made the decision to buy a home of your own. Seems simple enough. Find a home, get a loan and move on in! Right?
More today than ever before, our increasingly tight credit market demands a high credit score. Why? Over three quarters of all lenders use credit scores when approving loans or credit. It’s also used to determine your interest rate, the amount of your down payment and the variety of mortgage types available to you if you’re buying a house. The higher your credit score, the lower your interest rate. For larger loans, such as a mortgage, one point up or down in your score can add up to a significant amount of money.
The industry has changed over recent years as lending guidelines have become more restrictive making it harder to obtain loans.
|Credit Score||APR||Monthly Payment||Total Interest Paid||Extra Interest paid from 760-850 Credit Score|
|*Based on a 30-year fixed mortgage of $200,000. Rates not current, for example purposes only.|
What Lenders look for on Borrower’s Credit Reports…
- Outstanding debt
- Outstanding debt relative to the total available debt
- Length of credit history
- The pursuit of new credit
Lenders Prefer Borrowers With…
- Low balances on credit cards and loans
- A long history of on-time payments
- A mix of credit utilization (a couple credit cards, a car loan and a mortgage)
- Make a list of your outstanding revolving credit and add up all the outstanding debt. Add up your total allowable credit limits and divide by the amount of debt to see what your Debt-to-Credit ratio is.
- Make a plan of action to get your total debt-to-credit ratio under 30%. If you have several accounts, it is best to work on all of them equally but if you have a few accounts, tackle the smallest one and pay it off completely.
- Make sure you keep the oldest account activated.
- Make sure you are protecting yourself against identity theft and fraud.
The FES Protection Plan monitors and alerts you quickly along with having identity theft protection just in case someone is misusing your information.
As always, if you have errors on your credit reports or items that do not belong to you and you are not having success getting them removed, please take action and contact me for help.
For questions or additional resources, please contact me at Info@CreditGal.CO