Take Control of Your Credit Score

This is Morgan. He's married. He just had a new baby. And he's ready to buy his first home. This is A Home of Your Own. Once I decided I wanted to buy a home and started researching the appropriate loan I quickly realized the important role a credit score plays in getting a mortgage. The first thing my financial adviser told me to do was get a credit report. A credit report is a listing of all the credit that's been extended to you along with payment history for each account. A credit score consolidates an entire report into one three digit number between 300 and 850. As lenders see it, the higher your score, the more likely you are to make loan payments on time. He told me it could be difficult to get a mortgage with a low score. Or I might have to pay a higher interest rate. My financial adviser suggested that I focus on keeping my score over 700. That will give me the most loan options and the lower interest rate. The most important aspects of a credit score are payment history, which includes late and missed payments; the amount of money you owe compared to your available credit; the length of your credit history, any new credit accounts and inquiries, and the mix of credit types. For instance, a positive long term history will raise the score more than a positive short term history. Opening new accounts shortly before applying for a mortgage is going to produce a down taking score. A mix of well managed credit types, such as a credit card, a car loan, or student loan will work better for you than a dozen department store credit cards. So, how do I take control of my credit score? According to my financial adviser, the faster I pay off my credit card debt, the faster I'll see my credit score improve. And even more important, always paying my bills on time is the best way to maintain healthy credit. It's also important to keep an eye out for credit report errors that may negatively affect the score. The error may have originated with either the credit reporting agency or the lender on whose account the error appears. With these tips in mind I've been able to make my credit score work for me. Now it's on to the next step in the home buying process.