The OC Housing Specialist® Ultimate Guide to Buying, Selling, & Renting in Southern California

How Credit Reports Are Affected By Your Choices

I can’t stress enough how much money and stress you can save in the long run by putting your best credit face forward when applying for a loan, especially a large loan such as a mortgage you will be paying on for the next 30 years. Preparing your credit for evaluation by creditors should be the #1 step you focus on in the years prior to your purchase.

Why is this step so important? It is going to determine what rate you receive on your credit, which equates to how much interest you pay for the money you borrow. A high credit score gives you more access to prime rates so you can borrow more money at lower interest rates.

In other words, it is like you and a friend going to the same dealership to buy matching cars. You have a high credit score so they agree to finance you at a lower rate. Your friend didn’t prepare their credit for the large purchase, they had late payments and high balances resulting in a low credit score. Your friend ends up paying several thousand dollars more over the course of the loan because their initial rate was higher due to their credit being riskier to the creditor. Now, multiply those thousands to account for the interest on an even larger purchase such as a mortgage for a house. You can see where it I’m going with this…put your best face forward by preparing ahead of time!

Ok, so you get it – your credit report and score are important. But how can you affect it? Where do you start? What are the priorities? One of my preferred lenders has published this chart to give you insight into what affects your credit scoring:

Screen Shot 2016-01-20 at 9.27.46 AM

Let’s wrap it up with a quick summary list of where you should start and in what order to best influence your credit scoring:

  1. Make on-time payments. Every month.
  2. Keep your balances between 1-20% of the total available credit per card. Paying off your cards in full each month doesn’t show you are able to make payments over time as much as keeping that 1-20% balance does.
  3. Don’t close your older accounts, even if they aren’t used.
  4. Don’t apply for credit at multiple places within a short time.
  5. Make sure you have different types of credit accounts (revolving credit card, auto loan, student loan, etc).

via Summit Funding, Inc. Your Home Loan Experts

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This entry was posted on January 20, 2016 by in Investment.

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