Raising your credit score can greatly affect the interest rate or documentation required to secure a mortgage for you new home. The types of loan available in the Greater Baton Rouge Area are tied into the credit score of the borrower. Buyers with a very high score can get 100% financing at a good interest rate as well as doing loans that require little documentation.
Andy Aucoin of Resource One Mortgage offers these tips to raise your score in 45 days.
1. PAY YOUR PAST DUE ACCOUNTS.
Yes, this sounds obvious, but understand that credit scoring software severely penalizes you for having accounts with a past due balance. Making sure all of your accounts are current, and paying the amount that shows as being past due on the credit report can increase your credit score by a significant amount.
2. TRY TO GET RID OF YOUR LATE PAYMENTS.
Contact all creditors that have reported late payments on your credit and request a good faith adjustment that actually removes the record of late payments reported on your account. Be persistent, if they refuse to remove the late payments at first, remind them that you have been a good customer that would deeply appreciate their help. Call several times if you need to and ask for supervisors. All persistence and politeness pay off in this scenario.
3. REQUEST TO HAVE YOUR CREDIT LIMITS INCREASED.
Contrary to popular belief, having low credit limits on a credit card can actually hurt your credit score. Having low available credit limits affects your actual debt to available credit ratio. For example, if you owe a total card debt of $10,000 and your total credit available is $20,000, you are only using 50% of your total credit available. But if you have card debt of $10,000 and your total credit available is $15,000, you change your ratio to 66% of your available credit being used. The lower the percentage of debt to available credit the better, as it shows you are able to handle having credit available without running it up to the max.
4. DO NOT CLOSE YOUR OLD CREDIT CARDS, KEEP THEM ACTIVE.
15% of your credit score is determined by the age of the credit file. Therefore, even if your old credit cards have horrible interest rates, closing those cards will decrease the average length of time yoy have had credit, as well as increase your debt to available credit ratio as discussed in point 3. Use the old card at least once every six months to avoid the account rating to change to Inactive. Keeping the card active is as simple as pumping gas or purchasing groceries every few months, then paying the balance down. An inactive account is ignored by Fair Isaacs credit scoring software, so you will not get the benefit of the positive payment history and low balance that card may have had in the past.
Call your lender and see if raising your credit score can affect the amount of home you will be able to purchase. Give yourself time to raise the score before you start your house hunting search, then enjoy the benefits every month of that low interest rate!
No wonder, people grow more and more interested in what is going on in their credit reports. My favourite sources of financial information is your site and a site about credit score.
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