We have talked often about getting your financial ducks in order before hitting the pavement to find your Laguna Beach Dream Home for Sale. It’s always nice to look and dream about a life at the beach. But it’s even nicer to make that dream a reality.
I know that it’s hard to look past the forest of economic news that is in front of you and see the opportunities. But the fact remains that we are seeing prices of Laguna Beach Homes for Sale that were last seen in 2002! Plus, the interest rates remain at historically low levels.
Lenders are more cautious with some of their underwriting criteria for various reasons. Don’t let this keep you from doing what you can to position yourself to grab your dream home when the right opportunity and circumstances collide.
One of the entry level thresholds of obtaining a loan has always been your credit score. Understanding what is factored into this score will help you to create habits that will give you the best chance at the highest score available for you. Here are just a few tips:
- Bill payment history accounts for about 35% of your FICO Score. Paying your bills on time each month is important.
- Outstanding debt accounts for about 30% of your FICO Score. This is an interesting mix. The lenders want to see that you have other credit and you know how to use it wisely, but they don’t want you to use too much of it by maxing out your cards. Most experts advise to use less than 30% of the total credit limit. For example, if you have a credit card with a $5000 limit, then keep your balance at or below $1500. Unfortunately, if you have a card that you max out but pay off in full each month, it doesn’t always reflect in your favor on your report, even though paying the balance in full each month is a good practice. If you plan to apply for a loan in the near future, start getting your credit balances down to favorable levels.
- Credit history accounts for about 15% of your FICO Score. So if you are just starting out, you won’t get too many points here. However, it is a small percentage of the total score.
- The remaining 20%…well, that’s still a bit of a mystery!
- Don’t apply for too much credit in a short period of time since it may look as if you are desperate. If you are shopping for a loan, you get a little break since credit pulls from mortgage companies over a period of several days will count as a single credit inquiry.
- If you have been approved for a home loan, don’t make any major purchases, additional credit inquiries, or changes to your credit report. Lenders are pulling credit reports for approved borrowers right before they fund the loan (which could be after you have signed loan documents and think that it’s all over but the singing). Don’t get caught with your household belongings in the moving van and no place to go!
The good news is, wherever you are at right now in terms of your credit score, credit scores are salvageable. With the right information about what will give you the most bang for your buck, and a little determination, you can get your score to a level that the banks will approve.
Take action today with the following steps:
- Get a copy of your credit report. Call your lender and have them pull it for you or get a copy from the credit companies for free.
- Take the time to review the information to make sure that it is accurate.
- Correct any errors by writing to the credit bureaus and notifying them that there is an incorrect item on your report.
- Finally, make a list of steps that you will take to improve your score (i.e.…start paying bills on time, reduce the balances to less than 30% of the limit per company)
- Take action on the steps, little by little, consistently, each week.
Remember…nothing happens until something moves…so, get moving!
See you at the beach!
Until next time…
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