Credit Scores and Buying Real Estate in Today’s World
I recently read an article in the Washington Times that talked about Credit Scores and their relationship to a home buyer’s ability to purchase. Many many years ago the process of getting approved to buy a home involved meeting with your banker who would verify the income and assets necessary to purchase and then require a substantial down payment before obtaining the approval for a home loan. Today, buyers can choose to make a lower down payment but the mortgage approval process is far more complicated and daunting.
Today, lenders determine a buyer’s qualification by their credit score or FICO score. Certain lenders look at income and assets and available funds for down payment but they use an automated underwriting system that focuses heavily on prospective buyers’ credit scores. So not only can a borrower be denied based on his or her credit scores, but the rates they pay for their loans are now on a sliding scale that is directly related to those scores. If you are interested in getting a loan then you will need to have a good credit score.
One thing to note is that no matter how bad your credit score may be, there is always something you can do to improve it. There are plenty of companies that can help you to repair your credit but it is certainly something you can do yourself, and in the process, save yourself from paying unnecessary fees while simultaneously taking control of your own finances.
- Checking your credit report on a periodic basis, at least annually, is a good way to catch any instances where you might be the target of identity theft. By reviewing your credit report periodically, you can lower the impact that any identity fraud may have on your credit report and possibly catch it before it becomes a problem. If you are concerned about others accessing your credit report without your permission, you can freeze your credit report, which will limit who and under what circumstances can access your credit report. If you think you are a victim of identity theft, contact your local law enforcement authority immediately.
- Once you know what you have to work with, make sure that all of your accounts are current, and up to date. Forgot to pay the credit card bill last month? Well, this will go on your credit report and lower your credit rating. The longer and more often you do not make bill payments on time, the lower your credit rating will become. If you are having troubles paying some of your bills in a timely fashion, then maybe debt consolidation may be right for you. The important thing to remember here is that keeping your bills current, paying them on time, and doing this consistently will cause your credit rating to rise over time.
- Also, become aggressive with your payment plan. Pay bills off early if you can, and make sure you do not miss any more payments. The longer you can do this, the better your credit rating will become. If you have a credit card, but you have paid it off, then keep the account open, but do not keep your credit card, cut it up. By keeping your account open and in good standing, the credit card company will report to the credit bureau that you have a good history with them, which will increase your credit rating. Not only is paying your bills on time important, but so are paying off your debts.
It will probably take some time to repair your credit but it can be done. Get started right away and begin to take control of your financial future right away. There are a variety of sources of information on credit repair and building. The ultimate goal is to own your own real estate as that will ultimately lead you down the path to financial freedom if you invest properly. Be sure to take the necessary steps today and you will be rewarded tomorrow.