I have had the pleasure of working with a lot of home buyers looking to buy their first home or even their second or third home. I can’t tell you how many times I meet people who are ready and willing but not able. They have a steady job with a good income and by all accounts should be able to buy that new home. There is just one little 3 digit number getting in the way. Their credit score!
It breaks my heart to tell them that they will have to wait on reaching their dream but I will never leave it there. I love to encourage my homebuyers to take control of their credit score and make it work for them. It can be a 6 month process to get it under control but it’s worth it in so many ways.
Your credit score is calculated based on the information on your credit report. Their are three credit reporting companies in the United States- Equifax, Experian and Trans Union. Each maintains info about you and your credit history. This information is received on a constant basis from the different companies that have extended you credit. Your score is a number that ranges between 300-900 and based on your history of borrowing and repaying money. Employers, lenders, landlords, and other service providers will buy this information (your credit report) to help them decide if you are credit trustworthy.
Your Credit Score (FICO) is made up of the following:
35% is based on your history of making payments on time- 30% is based on the total debt you have with how much is still available to you
- 15% is based on the age of your credit lines, the longer, the better
- 10% is based on how often you apply for credit
- 10% is based on miscellaneous factors like type of credit
The higher the score, the more attractive you are to lenders. Your score may be high enough to get the credit, but the higher the score the lower the interest rate will be! Here’s your opportunity to improve your credit score. This can be done on your own or through a reputable credit counseling company.
*Note: Please keep in mind, there are many companies taking advantage of people who are interested in improving their credit. They may promise perfect credit in 30 days or the ability to remove legitimate negative items from your credit report. There are NO legal ways to remove legitimate items from your credit and your score cannot jump dramatically in 30 days unless you have a lot of false information on your credit report. Please stay away from these companies or you could find yourself in more hot water!
Improving your credit takes time and hard work but when done right will make all the difference.
This entry was posted on Sunday, April 15th, 2007 at 8:48 pm and is filed under Credit, Home Buyer, Money Matters, Mortgage, Tips for Buyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.