Your Credit Health

Okay. You’re tired of paying rent, and you want to buy a home. But, in this complicated process you’re not sure exactly where to start. Many people get the itch and just run out to begin looking for houses, not even knowing what they may be able to comfortably afford. The prudent homebuyer, however, realizes that the best course for obtaining a home that he can “live” with is to be familiar with his own financial situation. Makes sense, right? Sure it does. But there’s more to it than just knowing how much money you make and how many bills you have.

Perhaps you’ve seen or heard the advertisement “Do you know what your credit score is?” You would probably be shocked at the number of people who don’t. Your credit score goes a very long way toward determining what type of mortgage loan you can qualify for and the annual percentage rate (APR) of that loan. And the rate of the loan directly affects the monthly payment that you’ll be required to make. Your score isn’t the only determining factor, but it’s certainly at the top of the list of qualifiers.

So, how is your credit? If you don’t know, it’s very easy to find out. There are a large number of companies and websites that will give you your score or a copy of your report – if you sign up for a service from them such as credit monitoring or a credit repair course. These, of course, are not free. However, the Fair Credit Reporting Act requires the national credit reporting agencies to provide you with an absolutely free copy of your report, at your request, once every year. You can order a copy of your credit report online, by phone or by mail.

Once you receive your credit report, look it over carefully. Check closely for errors and old information. Most entries will stay on your report for seven years, so check for entries that are older than that. Are there any entries that shouldn’t be there? You have the right to dispute any erroneous or false information that you may find. The credit reporting agency must investigate your dispute within 30 days. If the information is found to be erroneous, it must be removed from your report.

There are many companies that offer to repair or “clean up” your credit report for a fee. Many of these are scams, so be very careful. The truth is that you really do not need these companies to repair your credit. You can get sound credit repair information from the Federal Trade Commission.

Don’t overlook the good credit that may not have been listed on your credit report. Many smaller credit cards, stores and companies do not automatically report accounts to the credit bureaus. Contact these creditors and request that they report your account in good standing. This can dramatically help your credit score.

Of course, the best thing that you can do is manage your credit wisely before it becomes unfavorable. In other words, pay your bills. Make a budget and stay within it. Don’t overextend yourself with more credit than you can afford. If you do find yourself behind, contact your creditors before they contact you. Many will be glad to work with you simply because you took the initiative. It’s in their best interest to help you meet your obligations.

The best medicine is always preventative. Know your credit standing and take care of your credit score. Get the information that you need in order to help repair any credit areas. With some time and persistence, this can be accomplished. Keep your credit healthy and when you’re ready it will reward you with a mortgage payment that you can comfortably live with.