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

Welcome to another holiday season of shopping, entertaining and spending.   Millions of consumers are pounding the pavement in every shopping district across the country.   Simultaneously, millions of credit cards are being swiped at the check-out register.   Are these consumers cognizant of their actions and how their habits today affect their credit score?   What separates those with the great credit from those with mediocre credit is a lifetime process of serious consideration when it comes to handling their financial affairs.   In this series of blogs, light will be shed on the credit score, how it affects financing real estate, and what you can generally do to keep it high.

Before the subprime lending fallout of 2007, anybody with a heartbeat and a verifiable identification card could get financed into a home. Ease and leniency were the mantras of the day.     No more.   The marketplace has changed with stricter guidelines and a real need for documentation. Your rate, terms, and the amount of paperwork you need to bring to the table are all dependent upon your FICO score.   The best rates and terms are reserved for high credit borrowers as it once was.

You may already be taking steps necessary to stay on the good side of credit.   In the lending environment we find ourselves now, a serious buyer would want to be considered a prime borrower.   Prime borrowers are generally characterized as having a FICO score above 700.   FICO stands for Fair Isaac Corporation and they developed the method of determining the probability that credit users will pay their bills.   Credit scores range between 300 and 850, although someone without a traditional history (usually no bank or financial institution involved) can have a zero score.   The fact remains you can take action and control your destiny concerning your credit score before you reach the lenders™ desk.   Think of your score as a lifetime tapestry of credit habits rather than the individual events or fibers that bind it together.   What steps can you take to keep your score high or what should you do if you know your score is less than prime?

High or maxed out balances have a negative impact on your score.   Be reasonable when dealing with a trade line that offers a high credit limit.   A good rule of thumb is to never go beyond 50% of the maximum allowable, and if you do, try to pay down the balance as quickly as possible.   Give yourself a break when making that next purchase you think you want but don™t really need.

More to follow¦

©  2007 Michael S. Amers

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