What you might want to prioritize planning for is acquiring finances to fuel your home purchase endeavor. However, as economic pressures are continually felt, having a lump sum upon the purchase may be impossible. Here is when a loan application plays a vital role for the fulfillment of your home buying effort. Then again due to the eminent fiscal crisis, loans with desirable mortgage rates are hard to come by and lenders are extra cautious in approving loans. One of the lenders’ rigid qualification requirements is an impressive credit score. If your score is nowhere in the average to excellent rating range, improving it should be your first step before applying for a loan, much less buying a home.
This numerical value is a representation of your current financial standing. Your debt to income ratio, assets, liabilities and other financial activities are all factored in calculating your score. Through this, the lender will scrutinize your capacity to pay your dues on time. If you have a good score, you have better chances at getting immediate approval of your loan, which may even include a more manageable mortgage rate. Meanwhile, good scores fall anywhere in the range from 620 to 800. While scores in the 600 to 400 cluster are conditionally or moderately acceptable, any rating within this range should still be subjected for improvement. If you are in this quandary, your first step to revive your standing is to re-evaluate and re-manage your finances.
Note that about 35% of your rating is attributed to your payment history. Thus, retrace your financial activities. Assess your payments, or lack thereof. Any unpaid debt beyond 30 days may be automatically included in your report. Such negative component can massively damage your creditworthiness. If you have not kept financial documents like income or bank statements, a way you could be sure no outstanding balances are present is to get hold of your credit report.
A copy of this document can be accessed for free once a year or with a minimal fee upon request from an authorized consumer reporting bureau. Upon receipt of your report, review each item in it carefully. Note that sometimes having a bad score may not be entirely the borrower’s fault. There have been cases wherein inaccurate or incomplete financial details were put in the report. Even the slightest .01 difference between your real standing and the reported data can gravely affect your score, which can consequently lead to worse conditions. Further details about requesting a copy of your report and correcting errors in your document are available through the Federal Trade Commission website.
The length of your credit history, new accounts and crediting activity comprise the remaining 65% of your score. These do not necessarily share equal bearing, but nonetheless each component is invaluable. Properly managed old accounts (savings and/or credit card) can especially aid your image as a stable creditor. Opening new accounts may be a contributing factor to enhancing your score but at the same time such activity can be detrimental to you. If you have too many accounts, a lender may think that you are biting more than you can chew. Thus, your credit consistency and maintenance may be discounted or questioned. Assess which accounts can truly boost your borrowing eligibility and score.
Lastly, seeking assistance from a professional financial advisor can do you good. You can consult such service provider through online sites or local offices. An advisor would firstly help you organize your personal finances and then later on guide you in strategizing how to find loans suitable for your home purchase needs.
Scrutinizing your own finances may be hard to do at first. But if you primarily become a responsible spender and payer, you are on your way to improving your credit score. Subsequently, your loan application to fund your home purchase endeavor would materialize in no time at all.