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Eight Things You Need To Know About Your Credit Score And Purchasing A Home?

Nov 04

filed under: Buying A Home, Real Estate

Credit scores are a key part of the home buying process! It’s important to understand how credit scores work and why they are such an important factor when you go to purchase a home.  Whether you are a first time home buyer, college graduate or have struggled in this economy, your credit scores are going to play a big part in whether or not you have the ability to purchase a home.

Here are some frequently asked questions along with answers regarding credit scores that I think you will find very helpful.

What makes a good credit score?

A healthy mix of credit~ an installment loan, 3 revolving credit cards with balances less than 30% of the limit and no collections, late payments or public records.

Can paying off a collection hurt my credit score?

It may. If pre-qualifying for a home loan talk to your loan officer before you do anything with the account.

How do I remove my ex from a credit card that we held jointly?

Divorce decrees do not remove liability from the creditor’s perspective. In most cases, the account will need to be closed and reopened in your name only.

What is the best way to establish credit if I can’t get a traditional credit card?

Apply for a secured credit card.

Will my credit score impact my home loan interest rate?

Yes, your credit score is factored in to what interest rate you will get.

Why do the credit bureaus have different scores?

Not all creditors report to all three bureaus and the scoring models for each are different.

Will debt management/credit counseling improve my score?

No, it has a negative effect on score. Some lenders view it as Chapter 13 bankruptcy.

Why is my score different from my mortgage lenders?

The scoring model for mortgage lenders is different than when you pull your credit.

If you have a credit score issue many mortgage brokers have the ability to work with you to help improve your credit score. Depending on your situation, in many instances, they can help you with the removal of a negative item on your credit report resulting in a higher credit score. This process does take time and may result in you having to delay your home purchase. Working with a reputable mortgage broker that can assist you with this process can be very beneficial. Please contact me if this is something you would like some additional information on. I have several lending sources that I can share with you.

Written by Howard Harris