Today to start a new week.. We thought about some of the issues we hear about every day from buyers, and wanted to be able to steer some of you in the right direction! Homeownership is a dream of everyone but unfortunately the economy has hurt a lot of people’s credit these days! We hope this article can give you a starting place on how you can start rebuilding your credit and be able to make your reality Homeownership! If you need any help on lender programs that may be able to work with you give us a call and we may be able to point you in the right direction! There are a lot of new programs to help people trying to get back on their feet! Tips for boosting your credit score By Pat Curry • Bankrate If youre thinking about buying a house or a car, your credit score is a very important number. The interest rate youll pay for the money you borrow will be determined, in large part, by this three-digit number thats generated from the information in your credit report. Most lenders have carved-in-stone rules about handing out the best terms, and those rules almost always place a major emphasis on your credit score. If their best rates are offered to borrowers with a score of 700 or higher and yours is a 698, those two points could cost you thousands of dollars. According to myfico, the consumer Web site of the Fair Isaac Corp. that created the FICO score (the most commonly used credit score), the interest rate difference between those two scores is about one-third of a percentage point. On a $165,000 30-year fixed rate mortgage, that third of a point could cost you more than $11,172 in interest charges, assuming 629 percent is the lowest rate available (see Bankrates calculators). Fall below a 660 and the rate goes up another .81 percent. Keep in mind that these are averages. Most lenders today practice tiered pricing, with interest rates rising as scores go down. Each lender chooses its own break points between tiers. Lender A may bump up the interest rate if a score falls below 700, while Lender B doesnt charge higher rates until the score is 690 or below. So if you stick with one lender, and that lenders break point is 700, raising your score from 698 to 701 can be vital. This underscores the importance of not only doing all you can to improve your score, but shopping thoroughly when looking for a mortgage. From the perspective of a mortgage broker, who can choose among a sea of many lenders, there are no sharp break points. Consumers should do what a good broker does -- look for a lender that offers the best rate for a specific score. But thats jumping ahead of ourselves. First things first: You can take steps to improve your credit score. The number of variables that play into an individual score make it impossible to say that one particular action will increase a given score by a certain number of points. But there are some good guidelines. The mantra for getting a great score is pay your bills on time, keep account balances low, and take out new credit only when you need it, says Craig Watts, consumer affairs manager for Fair Isaac Corp. advertisementPeople who do that faithfully have very high scores. It usually means youre being conservative and cautious about credit. Its not a toy and it shouldnt be a hobby. Speedy upgrade Thats good advice, to be sure, but these actions take a long time. What if youre house hunting and you just need a few extra points to bump you over the line to the great rates? Start by pulling your credit report and your credit score to see where you are. To get an estimate of your credit score, check out our Credit Score Estimator. If your score is above a 760, youre golden. Improving your score from 760 to 800 wont get you better terms. What youre looking for on your report are factors that could be affecting your score. Look for errors in the report, such as accounts that arent yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldnt be reported any longer (negatives are supposed to be deleted after seven years, with the exception of bankruptcies, which can stay for as long as 10 years). After repairing errors, the fastest route to a better score is paying down balances on credit cards, says Watts. Though its not an instant cure, paying down credit lines over a two month period can boost your score a substantial amount, and may be enough to put it over the edge if youre lurking just beneath the next tier of loan pricing. Had a few late payments in your past? Even if youve paid your bills late in the past, you can improve your credit score by paying every bill on time from now on, says John Ventura, a consumer law attorney and author of The Credit Repair Kit. Forget about grace periods, he says. If you want to have a really good record with the credit agencies, pay your debt before its due and keep your balances low. A big no-no One thing you shouldnt do if youre just trying to boost your score is close unused accounts, Watts says. If someone tells you to close unused accounts to improve your score, theyre pulling your leg, he says. It wont help you and it can hurt you. Closing unused accounts without paying down your debt changes your utilization ratio, which is the amount of your total debt divided by your total available credit. You appear closer to maxing out your accounts, he says. Thats why your score can drop. It doesnt mean people shouldnt close them, but dont close them to improve your score. If you do cut up cards, though, leave the oldest one open, says Steve Rhode, former president of Myvesta.org, a national nonprofit financial crisis center. advertisementThe length of your credit history is another factor in your score. If you close the account of the credit card you got when you were a freshman in college and leave open the ones you just got within the last couple years, it makes you look like a much newer borrower. Keep a couple of the oldest open; I dont care what the interest rate is, he says. Creditors dont care what the rate is. Working with credit card balances Another strategy for bringing up your score: Transfer balances from a card thats close to being maxed out to other cards to even out your usage, says David Chung, managing director for Maryland-based CreditXpert Inc., which provides credit tools to lenders. Or just spread out your charges between a few cards. If youre thinking about buying a house or a car, your credit score is a very important number. The interest rate youll pay for the money you borrow will be determined, in large part, by this three-digit number thats generated from the information in your credit report. Most lenders have carved-in-stone rules about handing out the best terms, and those rules almost always place a major emphasis on your credit score. If their best rates are offered to borrowers with a score of 700 or higher and yours is a 698, those two points could cost you thousands of dollars. According to myfico, the consumer Web site of the Fair Isaac Corp. that created the FICO score (the most commonly used credit score), the interest rate difference between those two scores is about one-third of a percentage point. On a $165,000 30-year fixed rate mortgage, that third of a point could cost you more than $11,172 in interest charges, assuming 629 percent is the lowest rate available (see Bankrates calculators). Fall below a 660 and the rate goes up another .81 percent. Keep in mind that these are averages. Most lenders today practice tiered pricing, with interest rates rising as scores go down. Each lender chooses its own break points between tiers. Lender A may bump up the interest rate if a score falls below 700, while Lender B doesnt charge higher rates until the score is 690 or below. So if you stick with one lender, and that lenders break point is 700, raising your score from 698 to 701 can be vital. This underscores the importance of not only doing all you can to improve your score, but shopping thoroughly when looking for a mortgage. From the perspective of a mortgage broker, who can choose among a sea of many lenders, there are no sharp break points. Consumers should do what a good broker does -- look for a lender that offers the best rate for a specific score. But thats jumping ahead of ourselves. First things first: You can take steps to improve your credit score. The number of variables that play into an individual score make it impossible to say that one particular action will increase a given score by a certain number of points. But there are some good guidelines. The mantra for getting a great score is pay your bills on time, keep account balances low, and take out new credit only when you need it, says Craig Watts, consumer affairs manager for Fair Isaac Corp. advertisementPeople who do that faithfully have very high scores. It usually means youre being conservative and cautious about credit. Its not a toy and it shouldnt be a hobby. Speedy upgrade Thats good advice, to be sure, but these actions take a long time. What if youre house hunting and you just need a few extra points to bump you over the line to the great rates? Start by pulling your credit report and your credit score to see where you are. To get an estimate of your credit score, check out our Credit Score Estimator. If your score is above a 760, youre golden. Improving your score from 760 to 800 wont get you better terms.
Posted on: Mon, 04 Nov 2013 15:00:08 +0000
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