Revamped regulations in the lending industry have made obtaining a new mortgage more challenging than ever. This has resulted in credit scores becoming much more important in the loan approval process than the used to be.
Thinking of taking advantage of the buyer’s market and jumping in? Checking your credit report is a great first step. Everyone is entitled to receive a copy of their credit report once per year for free from each of the three major credit reporting agencies. Keeping tabs on the activity reported on your credit reports is important, whether or not you are looking to buy a home. Your credit score can affect more than just your ability to qualify for a loan. Negative accounts on your credit report can keep you from renting a home or apartment, obtaining insurance or even getting a job.
Raising your ever-importaint credit score is not all that difficult, in spite of what it may look like. You can do this all on your own and stay away from companies that offer to fix your credit for a fee. If you feel like some support in this effort there is help for free from local non-profits, banks, lenders and the like.
Begin by ordering copies of your credit reports and reviewing them carefully. Any negative accounts (unpaid debts) on your credit report should be contacted promptly and balances negotiated to be paid, and marked as paid, on your credit report. Any items that you feel are in error or do not belong to you should be disputed through the credit bureaus. When the investigation is complete, the credit bureaus will provide updated copies of the credit reports for you. Review them again and repeat the process if necessary until you are certain that all of the information on your credit report is accurate.
A good credit score is more than just removing negative accounts from your report; you must show a history of responsible use to earn good credit: pay your debts, make payments on time, and avoid collecting new debts. For those without credit, this can start with opening a single credit card. One credit card, well managed, is more beneficial than multiple cards with outstanding payments. It takes time and consistent payment to build good credit, so don’t keep opening new cards. Each credit inquiry will actually lower your rating temporarily. Pay close attention to your credit limit. Contrary to appearances, the credit limit should never be the maximum debt you can carry. The limit of your debt should be well below the limit of your credit. For the credit cards to help improve your score, limit the balance you carry to 10% of your total credit limit.
With careful monitoring of your credit report and good credit practices, you can raise your credit score. Talk to your lender or call our good friend,
Aaron Mell at Wells Fargo Home Mortgage and start improving your credit today so that you, too, can jump into the buyer’s market.