In today's world it is so important to know and manage your credit. Your credit report is your power of borrowing; whether it be cars, boats, homes, starting a business, etc. Having an understanding about your credit will unlock the doors needed to progress through important aspects of your life.
Your Credit is an Extension of You
Before you ever begin the journey of buying everything on credit, you should take a peek at your credit report. If you are going to be renting, landlords will check your credit to see if you have a good track record paying your bills. If you plan to buy a home, your credit will determine what kind of offer you'll receive from a home lender. The better your credit the better the offer you'll receive. If you haven't already, the first thing you should do is pull your credit from all three credit agencies; they include Experian, TransUnion, and Equifax. You will want all three of them since none of them share your information with each other. If one agency report shows a credit or collections account, there is a chance the other two may not. It is all dependent upon how the creditor or collection agency reports your account and to whom. Your credit report shows a list of all your accounts you have or had in your credit history. Your accounts and your ability to pay them are then scored. The score indicates immediately to a perspective lender or landlord how reliable you are. The higher the score, the more you can be trusted to pay your accounts on time and in full. Your credit report and score is the first thing lenders will check when you apply for a loan.
Once you have your credit report make sure it is accurate. If it is not correct, there are tools to help you clean it up. It provides the necessary information to reach out to the creditor, whether to dispute the charge reflected or pay off the amount owed. If there are errors on your report you will be able to request to have them fixed or removed by filing a claim directly to the credit agency(s). Your credit report may be current and you may not be behind on any of your accounts, however, having too many accounts may also hurt. Especially if your debt-to-income ratio is too high. You may need to consider closing down some account to loosen your belt. On the flip side, you may not have enough open credit accounts and you'll want to open some. Be weary though, if you do this you need time between the open account and the time you plan to purchase property. You also want to make sure you don't utilize more than 10% on the account or it can hurt that debt-to-income ratio. Time open and low amounts owed are your key to a strong score. Once your credit is in order, it is time to go shopping!
Credit Preparation is the Key to a Successful Closing
Credit preparation will help you land that home you have always wanted. When you are searching for homes, be on the offensive. Your credit is a huge factor when it comes to your mortgage loan. Make sure you know what you want and can afford it. The first thing you will want to do is get pre-approved for your loan. This process includes having your credit pulled, verification of a down payment can be made and long-term employment has been established. Once you are passed these first few stages you will then lock down a certain interest rate and amount of money needed to purchase the home of your choice. You want this pre-approval as it significantly increases your bargaining power with the sellers of the home and speeds up the time it takes to close on the home.
Always keep your ducks in a row! Doing so will make it less likely you will run into problems; problems which can prolong the home buying experience. The last thing anyone wants is to be the person who doesn't have their finances figured out and the deal ends up falling through. With a little preparation and the knowledge you have of your own credit will get you that dream home and both your lenders and sellers will appreciate your preparedness.