If you’re looking to buy a home in Tempe, the most important thing that will affect you is your credit score. A high credit score is the key to landing a good loan at affordable rates. Of course, what counts as a high score? Every lender has different policies, so it pays to shop around and compare. Keep in mind that your credit score doesn’t just affect the approval process, but also your interest rate and thus, the monthly payments on the loan. So, what goes into that credit score?
The truth is, no one knows. The various credit agencies run all your finances through huge secret lists locked away in the depths of their computer dungeons, and the end result is the product of sorcery, alchemy, and the kind of accounting that’s only spoken of in hushed whispers. What we do know is that your score is affected by utility payments, credit card accounts, student loans, cell phone records and mortgages, among other things. Nearly every monthly payment you make will nudge your credit score up or down. Your credit report will show up the details of where you stand on these payments, and if something is late, outstanding or in collections.
Any sort of ugliness on your credit report can destroy your chances of getting the loan you need at the rate you want. To make sure your credit is clean and sparkling, go into your credit report and wipe out any incorrect, outdated or unhappy items that might be lurking in the financial background. Do this a few months before you go hunting for a home so the changes have time to flow through the credit bureau’s databanks.
Your credit report keeps track of who else has requested a copy recently, and too many requests in a short period of time can lower your credit score. You’ll also find a listing of the credit accounts in your name and what sort of balance those accounts carry.
A Solid Payment History is Your Best Credit Asset
The greatest concern when using your credit to tie down a loan is the payment history on your credit report. A history of paying your bills on time accounts for almost a third of your credit score. The sheer volume of payments also affects your credit score. One late payment won’t do much compared against 40 timely accounts.
Also, keep current with your revolving credit accounts, like those credit cards and department store cards. Many of the experts who study the shrouded whims of the credit agencies believe that balances higher than half of your available credit can hurt your score.
Little Changes Make a Big Difference
Although other aspects of your credit score only reflect a small part of the total, they all add up. When searching for a home loan, every point counts. Mixing types of credit can affect your score, as will opening new lines of credit. Be sure to take charge of your financial life before the lender makes that crucial decision.