With plenty of good housing deals in the DC area, you may want to go for it this Spring! Mortgage rates are down again, but will you qualify? Here are some pointers on what lenders are looking for and on how you can improve your loan-worthiness. You don't want your credit score to sabotage your chances of buying a home or catch you by surprise.
Your credit score impacts whether you qualify for credit and how much interest you will pay for it. How employers, lenders, and insurers view your credit score can determine your financial future. High credit scores result in the best employment opportunities, lower interest rates, and smaller insurance premiums. In contrast, low credit scores have the reverse effect.
These are difficult economic times and people are losing control of their finances. According to data provided by the U.S. court system, bankruptcy filings were up for the fifth year in a row nationwide. California, which was also hit hard by the housing slump, was also one of the state's to report higher numbers related to bankruptcy filings. In contrast, DC, which survived the housing slump better than many areas, has bankruptcy rates higher than the national average. Lenders are sensitive to potential loan-seekers with shaky credit.
Increasing credit card debt, bankruptcy, and foreclosures can affect your credit score. In view of today's looming economic crisis, many consumers are seeing their credit scores take a nose dive downward. Some people even believe the myth that once a credit score is bad, it can never be rebuilt. Amid the panic, they fail to see that a credit report is a credit history that records a person's buying and spending habits over time. So what would be the first step to rebuilding a credit report? It starts with taking a true look at financial decisions that can turn into bad habits.
There are four bad habits that contribute to bad credit scores. They are:
Spending without a budget - this almost always leads to disaster and keeps your finances unfocused
Making late payments - most companies charge you a late fee if you pay after the due date and report you late to the credit bureau after 30 days
Using credit cards irresponsibly - you should not max our your cards and should strive to leave about 30% of your credit limit unused
Not tracking credit scores - mistakes, often due to incorrectly reported information, can lower your scores
In addition, not having an emergency savings fund can affect your ability to pay your bills in tough times. This may sound simple, but you can bounce back from bad credit. Just follow the Common Sense Approach. Be willing to change the bad financial habits into good habits, one step at a time.
Can you bounce back from bad credit and bankruptcy? Of course you can, but it will take dealing with a financial reality check on your part. Be willing to admit your past mistakes and learn from them. Keep moving forward. You can turn your bad financial habits into good ones---a step at a time. Just follow a common-sense approach that will help you develop solid financial skills to deal with money and credit.
Depending on your individual case, your record may not make home buying a reality for you right now. It pays to check though. You might be surprised. If you find you need to work on your credit record, now is the time to get started. Before you assume that buying now is hopeless, contact real estate expert Rachel Valentino of Valentino & Associates. She'll walk you through the process of assessing your financing options (all with a friendly attitude) and then help you find a great home in DC, MD, or VA.