Maintaining a good credit score is essential
By now, most people know that maintaining a good credit history is essential to their ability to purchase a home, and in fact, borrow money for many other purchases. I think most people also know they are entitled to receive a free credit report each year (www.annualcreditreport.com).
People also know, or at least should know, that the most important thing they can do to maintain a good credit history is pay their bills on time. What they may not know, however, is that there are lots of other behaviors and actions that can affect their credit score, both up and down.
For example, most lenders will pull a buyer’s credit report a couple of times during the loan process. They will pull your report at the beginning, when you first apply for a mortgage, and then again, just prior to the closing.
If your credit score has dropped during this time, you could be in for a big disappointment. Credit scores are how mortgage lenders qualify you for a home loan.
Every loan has different criteria, such as loan-to-value, debt ratio, interest rate. Your credit score will determine which criteria you fall into. The better your score, the less expensive your loan terms will be.
For the next couple of weeks I will write about some of the do’s and don’ts that can affect your credit score and the loan you get.
First of all, if you are in the process of getting a loan, do not apply for new credit of any kind, including pre-approved credit card offers you receive in the mail. Every time that your credit history is pulled by a potential creditor or lender, you lose points from your credit score. You could possibly lose as many as 50 points as the result of a credit card inquiry.
Don’t cosign on a loan or change your name or address during the loan process. These could be events that lower your credit score.
If you receive something questionable in the mail, such as a debt collection notice, or something on your statement that you think might affect your credit score during the loan process, call your lender immediately to explain the situation.
These are simple little things you can do. Next week, I’ll write about credit cards, utilization rate and good credit card behavior.
