There is a new "buzzword" in
the mortgage industry.
Actually, it’s two buzzwords: Credit Scoring.
(Also called "FICO" scores – I won’t even tell you what that means).
In their never ending search to find an easier way to rate a person’s financial
ability, mortgage companies are using a new system called credit scoring.
What Happens When The Lender
Runs Your Credit?
When lenders pull up your credit report,
they can look at all of the debts that you have, how much you owe, how well
you make your payments, and many other things like if you’ve had any bankruptcies
within the last several years.
With your credit report, lenders now get a credit score which takes all
of this information and creates a credit score for you. This credit score
is a number that lenders use to decide which types of loans that you will
be able to get and be eligible for.
As with all new things, there is controversy over these credit scores.
Some types of loans require that you have a certain credit score to get
the loan – no exceptions. And credit scores change over time. As a matter
of fact, just applying for credit can lower your credit score.
Now that you know what a credit score is, here’s how to make sure you have
the best one possible…
Steps To Having A Strong Credit
Score
First of all, don’t apply for any new
credit cards or consumer loans.
Don’t go down to the furniture store and take them up on the "No interest,
no payments, no nothin’ for one year" financing program -- and don’t go
out and finance a car!
And Most Importantly, keep current on your
bills right now! Old credit problems can be overcome, but current
ones are a challenge. We know of a woman who was 90 days late on a
$20.00 Department Store bill and had trouble getting a loan.
You can do all of these things after you buy your house and get your mortgage,
but for your own sake, don’t do it before. Buying things on credit not only
hurts your credit score, but it also leaves less money for you to use as
a house payment.
And lenders look at this figure also to determine how much money they will
lend you, and how much they will charge you to lend it.
So wait until after you’ve bought your home and moved in to get that new
couch or big screen TV-- And there is another reason to wait.
After you buy your home, you can get a loan for up to 125% of your home’s
value to buy whatever you want.
And when you get a loan against your home, every penny of the interest you
pay may be tax-deductible!
