In the age of technology where most things are available online with a few strokes on the keyboard, I am amazed at the number of buyers who come into the process with very little knowledge on the information found on their consumer credit report.
The credit industry is huge, and as we know, it is a natural way of life for the majority of consumers. Few have the luxury of simply paying cash for an investment the size of a house. Most people rely on the various mortgage loan options to secure such a purchase, so the value of credit KNOWLEDGE can not be understated.
Here are some simple facts to consider:
1. Better credit will give you better interest rates and that can save you thousands. Example: A $200,000 loan at 3.5% interest = a monthly payment of $898.09 versus a $200,000 loan at 5.5% interest = a monthly payment of $1,135.58. The difference is $237.49 per month or $2,849.88 per year or $85,496.40 over the course of a 30-year note.
Would any of you consider leaving $237.49 outside at your curb every month? If so, please send me your address :)
2. Credit report errors happen on a daily basis. Many assume the credit agencies have enough safeguards in place to keep your information accurate and free from error. This idea couldn't be further from the truth. These agencies process massive volumes of consumer credit data each minute of the day. As such, multiple errors occur and without the proper information, one of these errors could be the difference between A+ credit and B- credit. (To protect consumers, errors can be removed, but the consumer is responsible for notifying the credit agency of these mistakes in reporting.)
3. There are 3 major credit agencies, and their records are not synced to maintain a commonality between them. The major credit agencies obtain various information from a host of sources. Some companies that extend credit, report your account history to all three agencies and others do not. It is not uncommon to find an error with one of the major credit agencies and not the other two. My advise is to check all three consumer credit reports on a regular basis. When thinking about buying a home, I recommend taking a peak at your credit profile at least six (6) months in advance in case there are errors within.
As I mentioned in my opening, technology has made it easy to keep track of things happening within our credit profile. I recommend using one of the truly free websites like www.annualcreditreport.com and start gaining knowledge about your report. This website includes access to all three major credit agencies: TransUnion, Equifax & Experian. There are also many available credit monitoring programs, websites, and the like throughout the internet. At the end of the day, select the company that is best suited to your needs and stay informed!
Best of luck in your desire to purchase a home and I hope this information was helpful. If you need help in the Austin, TX area market, feel free to reach out for any Q&A time concerning all things real estate!