Building Better Credit
When buying a home, you pay a lot of attention to the numbers -- the down payment, mortgage rate, closing costs, fees and so much more. One number that you might not be focused on is your credit score, which is one of the most important factors when qualifying for a loan.
WHAT IS A CREDIT SCORE?
In the U.S., there are over 400 consumer reporting agencies, that capture, update and store credit histories on most consumers. The three largest national credit bureaus are Equifax, Experian and TransUnion. These consumer reporting agencies create “credit reports” that show the history of money you've borrowed, how timely you paid it back, and how much open credit is currently available to you.
The positive and/or negative information in your credit report is summarized numerically in a range between 300 – 850 points. The number assigned to your credit history is called your “credit score”, and it signifies your creditworthiness. Your credit score helps lenders decide how likely you are to repay your debts and plays a significant role in determining the options available to you, including a lower interest rate.
The average credit score is 725. If your score is below 725, you can still get a loan, however you will not have as many options and you will likely have to pay a higher interest rate. If your score is in the low 600s, you will find it very difficult to qualify for a loan until you take the necessary steps to rebuild your credit.
REBUILDING YOUR CREDIT SCORE
Each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report, at your request, once every 12 months. You’re also entitled to a free report if:
· a company takes adverse action against you, like denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company.
· If you’re unemployed and plan to look for a job within 60 days
· if you’re on welfare; or
· if your report is inaccurate because of fraud, including identity theft.
To start rebuilding your credit score, you should annually request your credit report, from all three credit bureaus, as they each may have different information, and carefully review the details of each report.
When negative information in your report is accurate, only the passage of time can assure its removal. No one can legally remove accurate and timely negative information from a credit report.
However, if there is information contained in your report that you think is inaccurate and/or incomplete, the law allows you file a dispute. There is no charge for this.
DISPUTING AN INACCURATE/INCOMPLETE CREDIT REPORT
Source: Federal Trade Commission
HELP IS AVAILABLE
Just because you have a poor credit score doesn’t mean you won’t ever be able to get credit. There are many nonprofit credit counseling organizations that will work with you to solve your financial problems. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Reputable credit counseling organizations will discuss your entire financial situation with you, and help you develop a personalized plan to improve your credit score
CREDIT REPAIR COMPANIES
Every day, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. Not all these companies are reputable, so be careful, and do your homework before paying any upfront money. While these companies may be able to help you improve your credit history, they aren’t doing anything for you that you can’t do for yourself, usually for far less money. The truth is that only time, a conscious effort, and a personal debt repayment plan will improve your credit report.
HAVE GOOD CREDIT?
Have good credit & you’re ready to jump into the Tampa Bay Real Estate market? Just want to know more about the home buying process? We’d love to help. Contact us anytime. No pressure, no pushy sales talk. Just the answers you need.
