Do you know your credit score? If you are trying to buy a new home or any large purchase like a car or a boat, you can bet your lender will know. Your credit score is the most important factor in obtaining a loan, it indicates to a lender your history of being a responsible borrower. There are, of course, other factors taken into account when granting a loan such as income, down payment, debt-to-income ratio (DTI), and cash reserves, to name a few. Your credit score is one area where you can make the most positive or negative changes, sometimes without even knowing why. The actual formula used by the credit bureaus is a very closely guarded secret; however, there are many well known things that can be done to improve your score. There are also things that should be avoided to prevent lowering your score. Credit scores are determined using many different factors including: Payment History, Types of Credit, New Credit, Amounts Owed, and Length of Credit History.
There are things that can affect your credit score negatively, some are more devastating than others. The following chart shows just how some of these events can impact your score:
Today’s mortgage climate is even more sensitive to credit scores than ever before. During the real estate boom and subsequent crash, the term “sub-prime” mortgage became almost a household term. These mortgages were geared towards buyers who either did not have a high enough credit score, not enough income, or no down payment funds. This relaxed approach to lending has resulted, in part, to the worst foreclosure crisis in recent times. As a result, many lenders have set minimum credit scores that are higher than what most of the buying public has. Most mortgage loan programs require a minimum score of 640. There are some limited programs that go lower but they can have other restrictive requirements. These minimum scores are being re-evaluated and raised periodically, as more and more defaults occur.
The good news is there are many things that can be done to effectively raise your score, and some of them are very easy and don’t even involve paying off debt. The following is a partial list of things that can help raise your score:
- Pay all obligations on time (obvious, but crucial).
- Do not bounce checks or over draw bank accounts.
- Keep your balances on credit cards as low as possible in relationship to the available credit.
- Don’t close old accounts (older accounts lengthen credit history).
- Don’t open new accounts (unless absolutely necessary).
- Don’t allow anyone to pull your credit, as each inquiry will lower your score.
- Have available limits on credit raised whenever possible (to increase overall available credit).
- Check your credit report often, and dispute any errors promptly and in writing
- Never pay off old “charged-off” accounts, this will cause them to report as a current “charge-off”.
- Avoid co-signing any loans; this affects your score just as if you took out the loan.
If you currently have a low score, the above things can help, but it may be necessary to get professional help. First rule: NEVER PAY IN ADVANCE FOR CREDIT COUNSELING. There are many free services available and many lenders offer this service for free as well. Second Rule: credit repair is not done quickly, it takes time and discipline. If someone tells you they can fix your credit immediately, they are almost always wrong. A well executed program designed by a qualified credit counselor can make vast improvements.
Maronda Homes has been making the dream of home ownership possible for families and individuals in Florida since 1972. Their signature concrete block homes provide excellent value and durability, while delivering superior energy efficiency. Maronda’s cutting edge designs provide the maximum flexibility available from an affordable builder, and provide excellent durability with low maintenance.
A large part of the process of providing affordable homes involves the financing. Maronda Homes has always offered flexible and affordable financing options through its lending partners. FBC Mortgage, LLC, provides a seamless transition, enabling the buyer to have the entire process handled by professionals who understand not only the builder’s perspective, but the challenges of today’s mortgage market. FBC Mortgage offers credit challenged customers opportunities through its Gold Key Program, designed to help raise credit scores with the oversight of qualified credit counselors.
If you are thinking of purchasing a new home and want to know how to get started, stop in to one of Maronda’s sales centers today. They are located all over the Northeast Florida and Southeast Georgia areas, or you can visit online at: www.marondahomes.com/northflorida or at: www.marondahomes.com/georgia.