Improving Your Credit Before Buying a House?

If you are going to be in the market for a mortgage loan in the next 6 months to a year, now is the perfect time to start brushing up your credit.

The first step is to pull copies of your credit reports and get your FICO score so that you know exactly where you stand. You’ll be able to see both the positive and negative remarks affecting your credit, and take steps to correct them.

At a minimum, you should:

  • Work to bring all of your accounts current
  • Pay all balances due on time each month
  • Pay your other bills, such as utilities, on time each month
  • Consider paying off all of your older revolving debt with a
    low interest loan from your bank

It is also important that you don’t have too much activity or too many recent inquiries on your credit report when you apply for a mortgage. Be careful about opening new lines of credit.

As you analyze your debt relative to your lines of credit, you might be tempted to have older inactive or closed accounts purged from your report. However, you’re often better off leaving those accounts in. An older account showing a $0 balance or ‘pays as agreed’ is a positive factor in your score.

Once you’ve improved your credit and taken clean up action based on the last credit reports you ordered, it’s time to pull them again to get the updated versions reflecting the positive improvements to your history and score.

If you like, you can ask your mortgage lender in advance which bureau they intend to pull your report from, provide them with your own copy, and avoid them generating an additional inquiry into your account.

New Credit Score Changes Take Effect

FICO credit scores are changing, which may be a benefit or a detriment if you plan to refinance your mortgage or buy a home. Some borrowers could see credit scores change by up to 20 points. Here are 5 new credit score factors:

1. Amount of Available Credit

The ratio of account balance to the amount of credit available appears to have more influence on the credit score formula. The less credit available that a borrower has on credit cards, the lower the score would be. Having more credit available could result in a better score. This change could have a broad impact on credit scores used by mortgage lenders to qualifying borrowers, if credit card issuers implement more cuts on their maximum limits. It doesn’t matter if an account has a balance or not, credit scores may drop if the available credit limit is lowered.

2. Number of Open Accounts

It used to be that having too many open credit card accounts was viewed as a negative factor. However, it appears that has been reversed, provided that the accounts have not been delinquent or overused. Now, having more open and active accounts could have a positive effect on credit scores under the new scoring system. A potential negative aspect of this change is that more credit card issuers may close seldom used consumer accounts. Credit underwriters will also need to re-evaluate their lending policies.

3. Isolated Credit Issues

The new credit score model will apparently be more forgiving to mortgage borrowers who only have one major negative problem on their credit report. The scoring model calculates the severity and frequency of negative credit items. Depending on the item reported, isolated problems will have less impact on credit scores, as opposed to continuous and recurring late payments and delinquencies. Mortgage lenders and borrowers should welcome this change because of the potential upside of good borrowers not being lumped into a category of repeat offenders.

4. Small Collection Accounts

Collection accounts with an original amount of less than $100 are disregarded. Another positive benefit for borrowers with minor debts owed from parking tickets, unpaid library fines, small medical bills, or other disagreements. Infractions like these should no longer affect credit scores.

5. Authorized User Credit

The previous FICO credit score model allowed for authorized users on credit card accounts to build a positive credit profile without being the primary card holder. While some authorized user data is allowed, the new formula has reduced the ability to build credit based on this method.

Current mortgage rates on a refinance, also, prices and information on new homes in San Diego

Low interest Visa Amex and Mastercards

Low interest rates on a credit card is something we all want! The ability to pay off your credit card debt sooner, increases with each drop in the interest rate of your card.

My name is James Cameron, and I am a consumer credit expert. This article is only a sample of my favourite credit card market info, for my best secrets and tips, you need to visit my full article here -> low interest credit cards.

Reality is, a lower rate for you means better things? Why would you not want one? You might have heard that they can cost you alot more long term? I’ll show you a little more about them, that you might have never known.

I recently held a job in one of Australias top banks, in the credit card divisions, not to mention I have worked for over 8 years in personal finance. My secrets and tips will save you money! It certainly has benefitted my friends and me.

Some creditc ard banks will get your business by signing you upto a card by offering ‘sweet’ deals with periods of low interest or even 0% interest. As an example, you might see advertised, the 0% credit cards that target students, or first time card holders. 

Why would they do this? Well, card providers earn the least in interest in the first year you have your card, because they know from years of statistics that card holders spend less in the first 12 months…

After around a year, credit card users are not so worried about swiping the card and racking up debts that the banks and card providers love…

Ideally, this is not the best situation for you, because after the low rate period is up, you might be tied down to a bigger than normal rate!

Another thing to be aware of, is that when you go over your limit on a low rate card, you can expect much higher fees and penalties than on a normal credit card. I can let you know which ones are the worst too!

These are not the only aspects to watch, as your bank or your credit card company knows much more about the way you spend and borrow than you might believe…particularly when you bank with your card provider!

Above is only a sample of my favourite credit card saving info, for my best secrets and tips, you need to visit my full article here -> low interest credit cards.