Why should I care about my credit score?
At NorthEast Financial we like to make sure our clients have the best advantage possible when obtaining a home loan. A credit score is an important tool for underwriters to use when determining the character of an individual. Think of it as a game. Scores can go up and come down depending on your actions and what is getting reported. It is important to check on it to make sure no one is obtaining credit in your name. It might make you a little anxious the first time you check it but it gets easier.
There are three credit agencies; Experian, TransUnion, and Equifax. The three companies gather information to calculate your FICO (the acronym stands for Fair, Isaac and Company) score. Your score can range from 300 – 800. The agencies recalculate every 45 days. The higher your score the easier it is for you to obtain credit. Simple put a high score means you pay your bills on time with no problems, and a low score means that you have a history of not paying them on time. Anyone who is pulling your credit wants to know how responsible you are with your money and paying your debts.
When it comes time to apply for a home loan it is more important than ever. The FICO score determines your interest rate and how much PMI will cost. A mortgage is typically a 30 year loan therefore the total amount you pay on a 30 year mortgage can be significantly higher with a 650 score vs. a 750 score. I have seen credit scores go up 20 points and the PMI (private mortgage insurance) goes down considerably. PMI is paid until you have 20% equity in the house and that might take years. You can save yourself thousands of dollars in the long run by having a better credit score. For the purpose of obtaining a home loan the underwriters are going to look at the middle number not the average. For example if someone has a 700, 650, and a 649 – the underwriters are going to determine your rate using the 650 score.
If you are not happy with your credit score take action right away. Most likely at some point in your life you will have to take control of it anyway so you might as well make it today. We offer free credit repair at NorthEast financial. It might be easier than you think. Here is a list of actions to take over the next coming months. Contact me (Michael Shea) if you want professional help with this process. 860-788-7237
· Obtain a copy of your credit report. Look it over for mistakes.
· Determine which line items need to be improved or removed from your report in order to get your score up.
· Make a deal with any creditors you have owed and have not paid. (Bad accounts) in other words if you pay them they will report to the credit companies and have that removed from your record.
· Obtain a small credit card and use it limitedly. Pay it off right away and keep this up for the next coming months. Keep the balance at zero at the end of the cycle.
· Get your credit card balance down. Credit companies like it when your account is at 50% of the total credit limit or less. If it is higher than that it has a tendency to bring your score down. You are better off having two cards with $2500 on them with a $5000 limit vs. having one card with a $5,000 limit that is maxed out.
It’s easier than you think to repair your credit and get yourself back on track. Keep your debt levels below 50% and pay your bills on time. This will determine your credit worthiness, your character and your capacity. These are the “three C’s” that determine your final score. Don’t forget there are options to get things removed from your report and get your score where it needs to be in order to get yourself a good rate. Take action today call Michael Shea and see what your options are.
Michael Shea is a loan officer with Northeast Financial in Middletown CT. 860-788-7237