It's a buyer's market out there!!!...
Get in while it's hot!!!...
Let's Go!!!...
What are you waiting for?!!!...
Oh, credit woes? Well, let's work on that... While it is potentially a buyer's market, and believe it or not, a consumer doesn't necessarily have to have a ton of money for a down payment (no matter what the media, Aunt Josie, or your main-street bank may tell you), you do need some credit.
Many Americans haven't looked at their credit report in recent memory. Some Americans don't even know what a FICO score is, and they must trust a loan officer to help them through their credit woes. The unfortunate truth is, however, that many consumers make detrimental choices when choosing who to trust; choosing the loan guy or gal that smiles the biggest, paints the prettiest picture, or simply is practiced at telling the consumer what they want to hear as opposed to helping them become credit worthy. At that point, the consumer is either in the position to have to take two steps back and undo what's been done, possibly causing a several month delay in the purchasing of a property.
These are a few general tips to help the consumer get a jump start in the financing process:
1. The closer you are to are to your credit limit on your credit cards, the more the scores are depressed. The goal is to be below 30% of the credit limit. Should you not be able to pay down below the 30% mark, have good credit history with the credit card company, with regular on time payments of minimum+ some extra, and can be disciplined, you can possibly contact the credit company to request a limit increase to push the outstanding balance below the 30% mark. For example, should you have a $10,000 limit, and have $4,000 on the card (40%), ask for an increase to $15,000. The same $4,000 on the card pushes you below the 30% mark (~27%).
2. While we've all heard at some time that "zeroing out balances" on your credit cards is the best way to boost credit, this isn't always accurate. Department store cards are best to be "zeroed out", nationally based credit cards (Visa, Mastercard, American Express) are best to maintain a "running balance". The fact is, anybody can sit there with a drawer full of "zeroed out" cards, and credit bureaus would rather see how well you can actually manage your credit. To see your scores rise, it's actually better to keep a "running balance" on your credit cards. This means, charging the cards up to about 5-10% of the credit limit, and paying them down to about 1-2%. This will allow the credit bureau to "grade" you on how well you manage your credit.
3. Use Nationally based credit cards for your purchases. Department store cards and gas cards don't "rank" as well as Master Card, Visa, and American Express, and debit cards do not affect your credit one way or another. There are both secured and unsecured versions of these cards, so if your credit isn't good enough for an unsecured card, go to your local bank to apply for a secured card. The way it works is to deposit an amount, say $500, and secure the card against the $500. Rates will be high, bu that's ok; you are working to build your credit, not charge up the card.
4. When you get angry with a Nationally based credit card company, do not close the account. If you must, "0" balance the card and cut it up (as long as there is no annual fee attached). Credit bureaus rate longevity of your accounts, and closing an old Visa could actually hurt your score.
5. Avoid finance companies ... Rooms To Go, Best Buy, etc. use finance companies to finance their customers. These companies can be be bad news for your credit score.
6. No "authorized users"... There are 2 reasons to avoid being an "authorized user" on a card...Should the primary user miss a payment, the authorized user suffers the "late pay" consequence. As well, the authorized user gets the DTI "penalty". DTI is debt to income ratio. Should you have $1,000 on a card as an authorized user, then the monthly payment on the $1000 counts as a debt against the authorized user as well as the primary card holder.
7. Be aware of Consumer Counseling Credit services. CCC services can have the same detrimental effect as a bankruptcy in some cases.
8. Wait before paying off old collections...if a debt is over 2 years old, wait for the lender to require it be paid. Paying off old debt can actually lower your credit score. It reflects as "recent activity on a delinquent account", which can lower your score.
9. When beginning the home buying endeavor, do not make any major changes in your finances. For example, do not consolidate 3 high balance/higher interest rate cards into 1 low interest rate card. This can reflect as a major increase to 1 card, but open up 2 other previously high balance cards for additional credit purchases.
10. Keep a watch on your credit...You have 2 "free pulls" per year, and you must make sure credit bureaus are kept accurate. Creditors, at times, don't reflect paid off collections, paid down cards, etc., to all 3 bureaus. As well, mistakes are made by creditors when reporting at times. Don't allow mistakes to go unchanged for extended periods. This can wreck your score.
This is not an all inclusive list of credit tips, but more of a general tool and basic guidance. Should you have specific questions regarding your credit, please contact a well respected credit repair specialist in your area.
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