When you make a major purchase (like buying a Peekskill, Yorktown or Cortlandt Manor home), lenders look at your credit score to determine both your creditworthiness as well as the interest rate they will charge you to borrow the money. That's why it's so important to get your credit in as good a shape as possible before you buy. Here are some things you may have done that will hurt your credit score:
Late Payments - This is an obvious one. When you're 30 days or more late, your creditor reports it to the credit reporting agencies and your credit score is dinged.- Collections - When you stop paying on a credit account and the creditor has exhausted their attempts to get a payment from you, they will send the account to collections. This also includes any medical bills that you have not paid. Many people are under the mistaken impression that your insurance company pays all your medical bills. However, if the bill isn't paid, it is still the patient's responsibility to make sure it is taken care of. The collection agencies also report to the credit reporting agencies. So, not only do you get dinged for the original debt, but your credit gets hit a second time by the collection agency when you fail to pay them.
- Charge Offs - After your account has been delinquent for a certain period of time, the creditor may decide to charge off the debt as a loss on their books. Future potential creditors will see this as a huge red flag because it shows you don't always pay back your debts.
- Settlements - While paying a portion of your debt is much better than not paying at all, anytime you pay less than what is owed, it hurts your credit because it shows you didn't pay the original debt in full. This is true even when the original creditor OK's the lesser amount.
- Bankruptcies/Tax Liens - Unfortunately, many people find themselves in the position of filing for bankruptcy because they are unable to pay their debts. These will stay on your credit for up to 10 years. And, even after 10 years, you may still have to contact the credit reporting agencies to have them taken off. Tax liens will negatively impact your credit even after you have paid them off completely.
- Foreclosures/Short Sales - A foreclosure (including a deed-in-lieu of foreclosure) can cause your credit score to plummet as much as 150 points (up to 200 points if your credit was over 750 before) and stays on your credit for seven years. A short sale, on the other hand, will knock 75-100 points off your credit score. If you are responsible with your credit, you can qualify for a home loan again in approximately five years. With a short sale, you can qualify for a Peekskill, Yorktown or Cortlandt Manor home in two years, providing you've been responsible with your credit in the interim.
All of these behaviors will stay on your credit for at least seven years. So, before you decide to purchase your dream home in Peekskill, Yorktown or Cortlandt Manor NY, you may want to review how your behavior affects your credit so you can avoid future issues. As always, you should talk to your trusted financial or legal advisors with any financial questions you may have. Please contact me when you're ready to buy or sell your New York home.
Barbara Bodnar, Your Westchester, Putnam and Dutchess County New York Real Estate Resource
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