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What You Should Know About Credit Reports

Posted on 06/05/2017 in home buying

Whether you’re buying your first home or your fifth, when it comes to home buying you’re going to need a good credit report if you plan to finance any of it.

Your credit score is one of the most valuable things you own and it can quickly turn into bad news if you’re not careful. A low credit score will affect your ability to borrow money and may get you turned down for a mortgage loan. Alternatively, you may be offered a higher interest rate because the lender sees people with low credit scores as risky investments.

 

Many people don't know much about their credit score. If you are planning on buying real estate, you should prepare yourself ahead of time and build up your credit score. The following tips to improve your credit score should be helpful.

 

1.            Credit reports aren't always accurate.  Regularly check your credit report. Everyday we hear about thousands of credit cards being compromised through the hacking of large retailers' security and payment systems. These breaches can ruin your credit and be a endless headache for you.

 

If your personal information gets compromised, a thief will open up financial accounts in your name but not pay the bills. Those unpaid bills will work against you and affect your ability to buy a home. Keep a close eye on your credit score and your credit card accounts and report suspicious charges immediately.

 

2. Pulling your credit score may lower it. A "soft" pull is done yourself for personal reasons; it will have zero effect. A "hard inquiry" is when a lender pulls it up for loan approval. It will have a negative impact, but small.

 

3. A higher income does not equal a higher credit score. Income is not a relevant factor in establishing your credit score. Paying bills on time (or not) is what matters as well reducing the amount of debt you have.

 

4. Credit scores and credit reports are not the same. Credit reports are just one piece of the equation. Many factors go into calculating your credit score.  The three big credit reporting agencies are Equifax, Experian and Transunion, and you can get one free credit report a year from each. Take advantage of this to protect yourself.

 

5. Debt settlement will not remove debt from your credit report. Debt settlement doesn't fix bad credit. Late payments, bad information and other negatives remain on your record for up to seven years following the first "infraction" date.

 

6. Cash-only payments does not build credit. You can't build good credit unless you use credit. Get a couple of small loans or credit cards and pay them off as you use them.

 

7. Closing your credit card accounts will not improve your credit score. Closing a card lowers your amount of disposable income: the ability to pay off other debt. You don't want to lower "credit utilization" by closing out a card.

 

8. Smart management of your various banking accounts is not reflected in your credit score. These are not reported to credit bureaus and thus have no impact. But smart management usually means you are paying your bills on time.

 

9. Dispute inaccurate information from your credit report. You can dispute mistakes in your credit report and should. A valid dispute will result in deletion of inaccurate information. A dispute of negative, but accurate, information will be a waste of time.

 

10. Missed payments will affect your credit score. Any missed or late payment can be reported to a credit bureau and probably will be. Do your best to pay your bills on time.

 

Follow these guidelines and we think you’ll breeze through any mortgage application process. ReMax at the Beach helps many buyers find the perfect home for them and at a price they can live with. Reach out to us if you’d like us to show you how easy it can be to find a new home and breeze through the mortgage application process.