Credit Score
Your credit score is the determining factor when trying to obtain a loan for a house, a car, a credit card or any type of credit you may be seeking. You should never underestimate the power of your credit score.
This score can be your saving grace in your future when you do not have enough cash on hand to buy what you want or need. There are many instances that will arise throughout life when you have no choice but shell out a large sum of money, whether it be a wedding, a funeral or purchasing your dream home. And what happens when your credit score is below the prime rate of 620.
Your credit score has the potential to be 800. No you don't start off high and begin getting points deducted from it. When you don't have a credit card or any sort of loan, you simply do not have a score.
What is a credit score? Well your credit score is a mathematical number that is determined from different factors involving your payment history, your inquiries and a few others that we will discuss a little later on.
Let's begin with how your payment history is looked at. What they are looking to see is that you make your monthly payments on time and consistently. This is the most important part of getting and maintaining a good credit score. If you begin to fall behind and begin making payments later than 30 days, you are doing serious damage to you're a credit score.
Another aspect to keep in mind is keeping your balances low but you should always have a balance on your cards. This is important for two different reasons. Reason one is that if your debt is more that what your income is then your debt ratio is too large. This little magical number should be a debt ratio of 38% or less. The second reason is that credit card companies like a balance because this is how they make money.
Here are some other factors that play part in determining what is in your credit score. If you continuously apply for credit then they will leave remarks on your credit report called inquiries. These inquiries will lower your score if there is a lot of them. You should not apply for additional credit if you do not need it, remember to much credit is not good. It is a good idea to have a mixture of different types of credit such as, secured credit, unsecured credit and a car loan.
It is also very important that you try to open a credit account at the earliest point in your life because the length of an open account will increase your score. You can do this by obtaining a gas card, store card or any credit card. Use it and leave a small balance on it. This is the best thing you can possibly do to begin building an excellent credit score, they want a 10 year history on your credit report, so you can see the importance of opening one up as soon as you possibly can.
What is a credit score is securing the best possible security for you and your future, that will one day consist of a wife, kids and the house of all of your dreams. If your credit is bad then it will be very likely that you will be paying for it with high interest rates, which will increase your payments by hundreds of dollars every single month. And I am certain that you do not want to pay more money than you need to be paying. The only way for you to have control over your financial security is by obtaining and maintaining an excellent credit score.
Credit Score Mortgages
When you are thinking about applying for a mortgage for you're purchase of your first home then you should know some tips to make the entire process a little easier.
If you have a good credit score then it will be easy to qualify for a home mortgage loan. If your credit score is low you will have a tougher time finding a loan program that suits your needs.
Six months before you apply for a home loan you should purchase your credit report and also along with your credit score. You will want to make sure that your score is good, that it demonstrates you are a responsible person with a good payment history. This score should be between 650 to 800. If your score is 620 there is still a good chance that you fall into prime rate and can qualify for almost all home loan programs.
If your credit report has a few negative remarks that are inaccurate you will want to request that they be removed. To do this you will need to contact the credit reporting agencies by sending them a letter by certified mail with as much documentation as you can backing up your claim. They have 30 days to investigate your claim and after that they will send you a letter letting you know if they found that the item in dispute what correct or incorrect.
A good credit history will let the creditor know if you credit history. They can tell by looking at your payment history of smaller loans, like your credit cards and your car loans.
Your credit report begins that exciting day that you first get your very own credit card in your own name. When you first get debt into your own name, you are usually eighteen years old when you begin getting credit card offers. This is a good age to begin your credit history, because the credit reporting agency factor the length of time your first account was open, and they like a long history to look at.
Your good solid credit history will show that you have the financial responsibility to make your payments on time every single month and you will easily get approved for your mortgage with a low interest rate.
If your credit score is not as good as you would have hoped it would be doesn't mean that you can't get a mortgage. There are some things that you can do to increase your chances to get an approval.
When your credit score is low then you usually will have to have a down payment between 3 to 20 percent, depending on how low your credit score is. This will help to offset the lender's risk. So if you were unable to pay your monthly mortgage payment and the house forecloses on you then the lender will have a better chance of recovering all of his money.
Unfortunately when you have a low credit score you have no choice but to accept a higher than average interest rate on your home mortgage loan. And if you do not have a sizeable down payment then expect that the interest rate will be higher. This happens because the lender feels that they need to be compensated for giving you a loan when you are considered a high risk. There is some good to paying a high interest rate. If you make your payments on time then you can refinance your loan in 6 months to a year and lower the rate and ultimately your monthly mortgage payment.
