The Credit Crunch and The First Time Buyer
First Time Buyers
October 2nd, 2008
As Lenders become increasingly selective about issuing loans it is more important than ever that you know your credit score.
One of the most important things you can do as you prepare to buy your first home is to obtain your free yearly credit report from www.AnnualCreditReport.com. Be sure to look it over carefully for mistakes and contact the credit reporting agencies to dispute any errors. The three credit reporting agencies, Equifax - www.equifax.com , Experian - www.experian.com and TransUnion - www.transunion.com are required to remove unverifiable negative credit from your record. Once you have made sure that your credit report is accurate there are a number of steps you can take to raise your credit score. It’s not an overnight process so even if buying a home is a ways off I would encourage you to start today. Here are some tips for boosting your credit score;
- Pay your bills on time. As this can count for one third of your credit score it is very important that you avoid late payments. Payments that are 60 days late will be reflected in your credit history and lower your score.
- Avoid opening new credit. That 15% discount offered if you apply for a card at your local retailer may cost you a bundle. Too many inquiries and too much available credit can have a negative impact on your credit score.
- Keep older credit lines open. Accounts with a long history tell lenders that you are a good credit risk. Use them regularly and pay in full each month.
- Use Credit Responsibly. Keeping a few active credit lines open with timely payments will go a long way to boost your score.
- Reduce your balances. For many this will be the biggest challenge. Avoid making just the minimum payment on your credit cards. It is critical that you work towards getting your cards payed down to no more than 20% of available credit. This may take some time but with discipline and planning will pay big rewards. Not only is a full one third of your credit score determined by this factor if you are making only the minimum payment you are losing incredible amounts of money that could be saved for a down payment.
I can’t stress enough the importance of checking your credit to remove errors and look for cases of identify theft. These are much more common than you might think. Don’t fall for any of the “Fix your Credit Fast” scams that charge you a fee to repair your credit. This is something you can do yourself. Feel free to Contact Us to learn more about getting ready to buy your first home.
