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SLAYING THAT CREDIT SCORE – TIPS FOR A NEW YEAR

SOURCE:  Excerpted from an article by Jaymi Naciri for realtytimes.

“Getting ready to buy a house or thinking about it?  Where to buy, what to buy, and how you’ll afford it are at the top of your mind.  But if you’re not also concentrating on your credit score – actively trying to raise your scores as much as possible – you’re not looking at the whole home-buying picture.

Not only  does your credit score factor into what you’ll pay for your home, it can keep you from being able to buy one, period.  Your credit history determines what loans you will qualify for and the interest rate you will pay…a credit score provides an easy way for lenders to numerically judge your credit at a point in time.  It gauges how likely you are to repay your loan in a timely manner.  The better your history appears, the more attractive you become  as a loan customer. (eloan.com)

But – your credit score is not static; it can, and does, change all the time, and there are all kinds of ways to improve it.   Here are the smartest options to boost your score in the new year.

SHOOT FOR PERFECTION!  850 is the best score you can get.  While at may seem completely out of reach, there are people who actually reach the top.  On the widely used FICO credit score scale, approximately one in every 200 people achieves perfection.  Careful budgeting and detailed attention to every aspect of their financial picture are the tactics they use to get and maintain that score, and these tactics are the ones you should be using as well.

OR, SHOOT FOR 750.  If 850  is  out of reach within a reasonable time frame – meaning the maximum time you want to wait before buying a home – try for 750.  It’s the magic number for lenders and creditors, and it puts the ball in the the corner of the consumer rather than the lender, said The Motley Fool.  “You’ll often have lenders fighting for your business, and in nearly all instances,you’ll be offered the best interest rate by lenders, meaning you’ll have the lowest possibly long-term mortgage and loan costs of any consumer.”

SET UP AUTOMATIC PAYMENTS.  According to CreditCards.com, a good 35% of your credit score  is taken from you payment history.  You may have missed payments in the past that you need to deal with now, but you certainly don’t want to make another mistake while you’re trying to get homebuyer-ready.  Almost every creditor offers the option of automatic payments, and it’s the easiest way to ensure you never miss a payment.  Just remember to make sure there is enough cash in your account to cover the payments on the day the money will be coming out.

ASK BEFORE YOU SHUT DOWN CREDIT.  The amount of credit you have is a factor in qualifying – or not – for a mortgage.  Long-term credit use that has been managed properly can be helpful to your score.  “Length of credit history is considered when determining your score – so the longer you’ve had a  credit card, the better, says CNN Money.

WATCH YOUR CREDIT LIMITS.  Banks don’t look kindly on those who have used all their available credit because it gives the impression that you’re not living within your means.  The amount of available credit you use is the second most important factor in your score.  You should try to keep your balance on each card below 30% of your limit – even lower is better.

PAY DOWN YOUR DEBT…but check with your lender first.  If you’re trying to weigh the best tactics for improving your credit and you don’t have the funds to take care of every outstanding wrinkle on your credit report and pay down your existing debt at the same time, you definitely want to check with your lender before you make any move.  Every dollar is important, and while your credit score will soar as you pay off your debt as aggressively as possible without acquiring more, it could be that your lender has a strategy that places more importance on other credit issues in your report, or has structured your credit repair according to a different timeline.

DON’T BE AFRAID TO REFINANCE.  You may end up buying a  home before you get your credit score where you want it to be.  If you’re in an appreciating market, which much of the country is, and your score continues to rise after you close escrow, you might be in a position to refinance sooner than you think.  Especially if you buy your home with an FHA loan.  Their streamlined refinance program can potentially lower your rate without an appraisal, a credit check or job/income verification.”

SOURCE:  Jaymi Naciri for realtytimes.  IMAGE:  money.cnn.com

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