When I get clients looking that are looking to get a home loan usually they are eager to not qualify for one of the first time home buyer loans available, they just want to get qualified. One of the first questions that I have to ask anyone is “do you know how your credit is” ? Whether you want to buy Santa Maria property or a you are looking to refinance your home, many times the stumbling block is the credit. This blog post will be mainly concerned on a few simple things to be aware of regarding your credit such as. What is Credit? What is on a Credit Report? What affects your Credit? Just an FYI this is not gonna have every answer but should be something of a starting point for you. Out side of that if you have any questions on either buying a home or getting a home loan feel free to ask. I will post updates on credit and how to boost in later posts as to keep this from being to lengthy.
What is Credit? If you have a credit card or have ever borrowed money, you were given Credit, it can be from a friend or even from the local little store on the corner. Credit is basically you using someone else’s money to pay for things now and paying them back later. It also means that you agree to certain terms to repay this money that you have borrowed, usually with interest, whether it be to a company or to a person. A loan or credit should be considered a legal obligation, meaning that there could be legal consequences for failure to pay this money back. This is where people have either used or abused their credit to the point that the person (creditor) ends up having to take you to court if you cannot pay that money you borrowed back. Problem with today is we live off of credit you cannot turn your head without someone telling you gotta have this or that. So we end up borrowing money for the car, and even money for the Vacation. So in reality you are still paying for your vacation even a year later.
How do you know if you have good credit? There are times that people believe that have good credit without knowing what their credit situation or what their credit score is. I cannot tell you how many times, someone was in shock to find out what their actual credit score was. Its not always the clients fault their can be misinformation on the credit report such as someone else’s information on your credit report. Other times its old accounts that are in collections that that the client may have forgotten about. The best way to find out what your credit to just get a Credit Report. A Credit Report is a record or a history of how you have paid your credit card debt, installment loans, and other debts, like utilities, doctor bills, insurance bills, etc. You can go to www.annualcreditreport.com and get a free report once a year to find out what is showing on your credit. Only problem is that they do not show your scores they charge you 7.95 last I looked for your scores. Your scores are what you need to know not just the what is reporting on your credit. That is basically like having only some of the ingredients to a recipe.
Within a Credit Report there are three reporting agencies. Their names are: Equifax, Transunion and Experian. These reporting agencies do not share information with each other and they do not grant or deny credit. They simply report information as it is supplied to them by your creditors. The creditors can report to one of these agencies or to all three, It just depends. THIS IS VERY IMPORTANT to understand!!!! Most people have had their credit checked when buying a car or furniture or getting a cell phone. WHEN BUYING A HOME A CREDIT CHECK IS DONE ON ALL 3 BUREAUS. What this does is catch what may not be reporting on one of the bureaus so your credit score can be completely different when you bought that car. I have had people come in thinking they have a 680 for example and instead they really only have a 620. When it comes to mortgages we use the Middle Score so Experian can have a 680 , Trans Union can have a 610 and Equifax a 620. So the lender will settle on a 620.
There are several types of information that are included in all Credit Reports.
- Identifying Information: your name, current and previous addresses, telephone number, Social Security number, date of birth and current and previous employers. This information comes from credit applications you have filled out when you applied for credit.
- Credit Scores: a number from each credit agency (Equifax, Transunion and Experian) based on a secret computer model that grades your credit history.
- Credit Information: This contains specific information about your credit cards, and other loans. This information includes the date opened, credit limit or loan amount, balance, and monthly payment. The report also shows your payment history during the past several years and the names of anyone else responsible for paying the account, such as a spouse or a so-signer. It also shows late payments and accounts turned over to collection agencies.
- Public Record Information: bankruptcy records, foreclosures, tax liens for unpaid taxes, monetary court judgments (such as lawsuits), and, in some states, overdue child support. This information comes from federal, state, and local government public records.
- Inquiries: the names of those who obtained a copy of your credit report and how often you have applied for credit in the past two years.
- OFAC Compliance: due to the Patriot Act, your information will be checked against the federal lists of potential terrorists, I have never seen an alert as to whether someone is a terrorist or not.
As you can tell there is enough information on your credit report to basically become you online. Something to seriously keep in mind all that is needed to basically run your credit and steal your identity and become you on paper or virtually on line. Is your name, your DOB and social. its not always a best idea to put your DOB on social networks for example since that is just one piece of the puzzle make them work for it and find it.
Simple tips to boost your scores
1) Don’t make minimum payments on y0ur credit cards make a little extra it registers if you are just making minimum payments.
2) Don’t max your cards out, if you do not need it don’t buy it pretty simple don’t have money in the bank to go on vacation then don’t go. Once you get over 50% of your credit limit you start to loose serious points.
3) Don’t apply every time at the check out so you can save 10%. Seriously its not worth it all it does is encourage spending and cost you points on your credit score.
4) Just pay on time.
Next blog more tips on boosting scores, what to keep in mind when getting a home loan etc. what lenders look for.