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If you’re looking to buy a house within the next 12 months, why not make one of your resolutions one that will improve your financial situation and position you as an ideal home buyer? That’s right – we’re talking about your credit score.
The lending world has changed considerably since the boom days and so has the credit score required to qualify for a loan, not to mention a low interest rate. "About two years ago, you could have had a score of about 620 or so to get a lender's best rate on something. Now, lenders are really looking at a rate of 760 at the least,” said Kelli Grant with SmartMoney.com. First-time homebuyers fare much better, needing a credit score of at least 660 unless they try for an FHA loan. The truth is, to be a “good” buyer in the eyes of lenders you need to keep a close watch on the state of your credit score. Here are several tips to maintain and improve upon your current number.
Get copies of your credit report--then make sure the information is correct. Go to www.annualcreditreport.com. This is the only authorized online source for a free credit report. Under federal law, you can get a free report from each of the three national credit reporting companies every 12 months.
How many and what types of credit accounts do you have? Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may impove your score. However, too many finance company accounts or credit cards might hurt your score. To learn more about credit scoring, see the Federal Trade Commission's website, Facts for Consumers.
Beware of credit-repair scams. Sometimes doing it yourself is the best way to repair your credit. The Federal Trade “Credit Repair: How to Help Yourself” explains how you can improve your creditworthiness and lists legitimate resources for low-cost or no-cost help.
Source: http://www.federalreserve.gov/pubs/creditscore/default.htm
Brought to you by Randy Charlton of Century 21 Home Realtors.