Buying a Home? How is Your Credit? Part Three of Four

Continued from the previous post¦

Some energy utilities make it easy to make regular monthly payments, but heaven help you if you are one day late.   They report late payments faster than almost anyone, unlike credit card companies which offer a grace period for purchases.   Moreover, the instance of a late energy utility payment seems to always adversely affect a FICO score.   The best policy here is to anticipate your energy bills are highest in the winter and to set extra savings aside during non-peak summer months.   Forgo the payment plan if possible.

Errors on credit reports are fairly common and should be addressed long before the underwriter at the mortgage bank does.   When purchasing or refinancing a home, the first step early in the process should be to check your credit history with a lender.   This is part of the pre-qualification process of actually knowing what you can afford.   Review your credit history.   Is it accurate?     The end of the report provides instructions on how to dispute errors.   It is a good idea to periodically check your report, about every 12 months.   You are entitled to receive a free credit report from the three credit repositories, Equifax, or call  800-525-6285;  Experian, or call 888-397-3742;  and Transunion, or call  800-680-7289.

Even though it sounds self-fulfilling, a real estate mortgage is actually the best way to leverage yourself into a high credit score.   A first time homeowner making mortgage payments on time should see a noticeable improvement in FICO score.   To be perfectly clear on what leverage means to the consumer, if you buy what you can comfortably afford and can handle making the payments for the long haul in a timely fashion, your score will skyrocket.   However, if you have any issue with making timely payments, those late payments will show up on your report and drown your score into the depths.  

More to follow¦  

© 2007 Michael S. Amers

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