Today's mortgage lenders care about one number more than any other: your credit score. If this figure is high enough, lenders will give you a mortgage loan that comes with the best interest rates. If it?s too low, they won?t give you any mortgage at all.
Your credit score, also known as your FICO score, is a single number that tells mortgage lenders how well you've managed your money in the past. It tells them whether you've paid your bills on time or if you've run up your credit cards. It will include any bankruptcies you've filed.
If your credit score is a good one, one that is above 700, most mortgage lenders will approve you for a loan with the lowest possible interest rates. But if your score is a weaker one, though you might still receive a mortgage loan, you?ll certainly be forced to higher interest rates. Lenders do this to shield themselves from the extra risk they taken on by lending money to borrowers who have a history of missing payments.
The good news is that you can improve your credit score. The bad news is that there is no quick way to do this. You may hear radio commercials from companies that claim they can clean up your credit report instantly. Don?t believe them. Improving credit takes time and work.
The first step in this process is to order copies of your credit report from the three bureaus that maintain credit scores, Experian, TransUnion and Equifax. Scan these reports carefully, looking for any errors. If you find any, contact the bureau to report the mistake.
Having these errors erased from your report can help strengthen your credit score. The bad news, though, is that having this done is not a quick process. It will not result in an immediate change.
If you find no errors, you?ll then have to take on the real hard work: improving your own financial habits.
Begin paying your bills on time. This is crucial to earning a good credit score. Pay off your credit cards. Once you?ve paid off a card, close down the account. You don?t want too many lines of credit open at once.
Taking these steps will gradually boost your credit scores. A better score, though, won?t happen overnight. It takes time to erase bad financial habits. That?s why there?s no quick way to improve a credit score.
You may have to wait before applying for a mortgage loan. This might be the best course of action, anyway. You need to be financially mature before taking on the burden of a monthly mortgage payment.
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