There’s nothing magic about credit ratings
For about five years, we’ve been on the magical mystery tour of home financing. The magic happened when unqualified buyers were granted home mortgages if they were able to fog-up a mirror, and the mystery is how they will now fulfill their financial obligation.
Because of all the smoke and mirrors surrounding home finance during this time, it has recently become difficult to qualify for financing unless your credit rating and credit score are clear as a bell. This is happening at the same time that people who have previously been boxed out of the home purchase market are finding themselves in a position to buy a home.
As property values drop, 40 percent on average in Florida, and are combined with low interest rates and some tax incentives, renters are realizing they may be closer than ever to their dream of owning a home. But in order for new buyers to get into the marketplace their credit and other qualifying parameters must be sterling.
Existing homeowners, whose credit may have deteriorated since their last application for financing and now want to buy another property, relocate or refinance, are also having a difficult time. There are, however, several steps you can take to either repair damaged credit or to make sure your credit never gets damaged.
Everyone, even those of us who have no intention of making a real estate purchase in the near future, should check his/her credit report for errors on a regular basis. The three national credit report agencies, Equifax, Experian and TransUnion are legally required to provide you with a free copy of your report once every 12 months. You can request a copy at www.annualcreditreport.com.
The reports are free, but if you want to know what your credit score is, you will have to pay a fee. It’s a good idea to know your credit score, especially if you plan on purchasing a home. High credit scores, especially those over 700, will give you better interest rates and easier processing of loans.
Also check all three reporting agencies, since they frequently have conflicting information. If you find a discrepancy, they are required to investigate and correct any errors.
The credit reporting agencies also have credit watch programs, which can be purchased from them, that will monitor charges on your credit cards and advise you of anything unusual that has occurred, as well as notifying you if an unauthorized credit report has been requested.
Of course, the best way to maintain good credit is to not pay anything late, especially home mortgages, car loans and other big ticket items. Having and using credit cards is a good thing, but carrying high balances is not, particularly if your monthly payments are late.
If your credit needs to be repaired, be careful who you ask to help. Fee pay credit repair services are advertised all over, but are rarely legitimate. Most of what you need to do can be done on your own or with the help of non-profit groups that offer credit counseling. One of them is the Association of Independent Consumer Credit Counseling.
Take the mystery out of your credit rating while still keeping the magic in your ability to purchase a home. The Beatles would approve.