Is finding the perfect home the most important step in the home-buying process?
Not even close!
The financial aspects of the process will determine how dreamy a home you can buy and how comfortably you can afford to pay for it every month.
The bedrock of these aspects is your credit score. Sadly, many Americans do not understand how vital this score is to their success when buying a home, an auto, or even insurance.
If you’re trying to raise your credit score, it’s important to understand what factors affect it negatively and positively.
Late payments show up on credit reports so quickly that it’s as if the bureaus are standing over our shoulders when we write the check or go online to pay a bill. In all fairness, the experts at Equifax.com say that the average time period from late payment of a bill to this information being reported to the credit bureaus is 30 days.
This is scary because even one late payment can cause credit scores to drop. To top it off, each time you make a late payment, it will remain on your credit report for seven years.
The moral of this story is to pay your bills on time every month.
Closing credit card accounts you no longer use may seem like a good way to improve your credit score, but it’s not.
This is because one of the factors used to determine your credit scores is your “debt-to-credit” ratio. “That ratio is how much of your available credit you’re using compared to the total amount available to you,” says the pros at Equifax.com.
When you close an account, you’ll have less available credit, raising your ratio.
Also, older accounts have more clout than newer ones. “The history of your credit accounts makes up 15% of your FICO Score,” according to Lora Shinn at LendingTree.com.
“So that credit card you opened 15 years ago may well be helping to boost your credit score by increasing your average age of accounts,” she concludes.
Opening new credit card accounts would give you a leg up on a credit score, but it will do the opposite.
Opening new credit card accounts may impact your credit scores in two ways: the hard inquiries resulting from those applications and the new accounts themselves may lower the average age of your credit accounts.
Utilizing the credit you have may help your score, yet another factor that seems counterintuitive to many. If you don’t use a credit account, no new information is reported by the bureaus. This, in turn, “… may make it more difficult for lenders and creditors to evaluate your application for credit or services,” according to the credit experts at Equifax.com.
If the inactivity continues, the creditor may close the account. As mentioned earlier, a closed account may hurt your credit score.
Use your credit accounts, especially for small purchases, and pay the bills when due.
You’re entitled to a free copy of your credit reports every 12 months. It’s important to take advantage of this offer if you hope to keep track of your credit score. Go to annualcreditreport.com (the only source authorized by the federal government) for the details.
Whether buying, selling, or seeking valuable insights into the market, I'm here to be your trusted guide in the dynamic world of real estate. Feel free to contact me for a confidential discussion, where we can explore your goals, address any questions, and navigate the exciting path of real estate together. Your real estate journey is unique, and I am committed to providing personalized assistance tailored to your needs. Don't hesitate to connect; your next real estate adventure awaits!
Dani
734-623-9442
dani@danihallsell.com
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