If you've ever applied for a home loan with less than stellar
credit, you know how much extra you have to pay. Even though it
can take some time, credit repair is definitely worth pursuing.
Credit Scores
When considering your application for a home loan, a financial
institution looks at your credit and assigns it a score. In the
industry, these scores are loosely referred to as a type of
paper. The best scores equate to "A" paper, while lower scores
are graded just like in school, to wit, "B", "C", "D" and "Oh,
my god" paper. If you have "A" paper, you can expect to get the
best deal, while lower grades are known as sub-prime borrowers.
Credit Repair
Credit repair is important because even small movements in your
credit score can move you from one score to the next. If you
move from B paper to A paper, you will save thousands of dollars
in lower interest rates. A credit score of roughly 680 is
considered to be A paper. If you have a score of 670, credit
repair can bump you to 685 and save tens of thousands of
dollars. In short, you want to make the effort to repair your
credit whenever possible. Don't just sit and suffer with
sub-prime loans.
To repair credit, there are simple and not so simple steps that
can be taken. Let's take a look at some.
Credit Card Debt Ratios
Believe it or not, you can improve your credit scores by simply
moving credit card balances around. A credit card with no
balance actually doesn't help you much if you have another card
that is maxed out. If you shift the debt evenly among all credit
cards, you credit score should increase. This has to do with
something called your ratio of debt to available credit. It is a
loophole of sorts, so take advantage of it.
Closing Accounts
Don't! Many people will close credit card or other borrowing
accounts when they are done with them. This is a huge mistake.
First, it hurts you because you've reduced the available credit
portion of your debt to available credit ratio. Second, you lose
a record of your long-term credit payment history for the
account. Lenders like to see these, so suck it up and keep the
account open.
Inquiries
As strange as it sounds, inquiries on your credit report hurt
you. Try to eliminate these by challenging them through the Fair
Credit Reporting Act and limiting the credit applications you
pursue. You can challenge inquiries by ordering copies of your
credit reports and following the instructions on the report.
Make sure to do this for all three credit reporting agencies -
Equifax, Experian and Transunion.
Check Your Report
The big three credit agencies must report to Congress each year.
Each year they report an astonishing number of problems with
their systems. This can affect you since accounts will appear
that are not yours. If these accounts have problems, your credit
score goes down. Make sure you check your report before applying
for a loan. You want to deal with these issues before you are in
escrow.
Borrowing large sums of money for a home loan can be
intimidating. Avoid acting like a dear in the headlights. Deal
with your credit issues and save yourself thousands in payments.
About the author:
Dan Lewis is with
http://www.gwhomeloans.com - a San Diego
mortgage brokers providing San Diego home loans. Visit
http://www.gwhomeloans.com/services.html to learn more about
options on San Diego mortgages from a San Diego mortgage broker
company.
