Learning to Repair Your Credit Raleigh NC
Learning to Repair Your Credit
Learning to Repair Credit before Purchasing a HomeAuthor: Katrina Marie Santes
Many people look forward into getting loans before buying a house. However, getting one is not as easy as picking a plan and paying for it on an installment basis. Lenders would have to evaluate everything about the borrower. However, the most important data that has the highest impact on loan application is credit.
So before you buy a house, a credit rmight need some fixing. If you asked why, read on and you will learn how credit can affect home buying and how it can be repaired.
But first things first, you have to understand what credit is.
Every person has a credit and most probably living on it. Anyone can get it every time an institution would grant money for borrowing. People use the borrowed money to buy things when they do not have available cash. However, this would have to be repaid and it usually comes with interest.
Paying back credit is easier when you keep it low and when you have a stable source of income. But when you don’t, you might end up with late payments or could possibly be in default. If this constantly happens, you would have a bad reputation to your lenders, tenants and other merchants. And if they are unhappy, this will reflect on your monthly credit report that will be submitted to the Credit Bureau.
Credit Reports Affect Home buying
Credit is your make or break in home buying. As mentioned above, any loan relies on it, especially mortgage.
Lenders take time to investigate a person’s credit history. They do this to determine if the person is worth granting the loan. It is also one of the basis in determining the interest rates. So how do they do this? They do it by calculating the credit rating or scores.
Most Credit bureaus use FICO scoring methods in obtaining a person’s credit ratings. There are several items to be considered, the following are:
- History of payments made= 30%
- The remaining value of your existing debt = 30%
- Period of having a credit = 15%
- New credits obtained = 10% (can be highly affected by inquiries with your permission)
- The type of credits obtained= 10%
Fair Isaac Corporation has created a scoring system that is used by most lenders. This is how they determine if you are qualified for mortgage and whether you are getting cheaper interest rates or not.
This scoring can be affected by your history payments, outstanding debts, length of time you had a credit, establishment of new credits and type of credits you have. Each of these factors has their respective percentage. The higher score you get the better deals you get with loans.
Since mortgage is inevitable in home buying, a person needs to make sure his or her credit standing is in a good shape. Otherwise, mortgage approval will be decline. Or it can be approved with high interest rates.
Fixing the Credit
So before you buy a home, get cracking on fixing your credit (even if you are sure it is good). Here’s how you can do it.
- Fix any erroneous data from your credit report.
- Keep old debts and make sure you repay them on time.
- If you have credit cards, lessen its outstanding balance. The smaller it is the better.
- Limit authorization of hard inquiries.
- Avoid getting new credits before getting a loan.
Do not wait for the last minute to fix your credit. If you plan to buy a house, start checking your reports and continue good practices in paying off existing loans. This way, you’ll be assured of good deals on mortgage.About the Author:
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