|
Credit Repair – From C To A Paper
By: Dave Lewis
If you’ve ever applied for a home loan with less than stellar credit, you know
how much extra you have to pay. Even though it can take some time, credit repair
is definitely worth pursuing.
Credit Scores
When considering your application for a home loan, a financial institution looks
at your credit and assigns it a score. In the industry, these scores are loosely
referred to as a type of paper. The best scores equate to “A” paper, while lower
scores are graded just like in school, to wit, “B”, “C”, “D” and “Oh, my god”
paper. If you have “A” paper, you can expect to get the best deal, while lower
grades are known as sub-prime borrowers.
Credit Repair
Credit repair is important because even small movements in your credit score can
move you from one score to the next. If you move from B paper to A paper, you
will save thousands of dollars in lower interest rates. A credit score of
roughly 680 is considered to be A paper. If you have a score of 670, credit
repair can bump you to 685 and save tens of thousands of dollars. In short, you
want to make the effort to repair your credit whenever possible. Don’t just sit
and suffer with sub-prime loans.
To repair credit, there are simple and not so simple steps that can be taken.
Let’s take a look at some.
Credit Card Debt Ratios
Believe it or not, you can improve your credit scores by simply moving credit
card balances around. A credit card with no balance actually doesn’t help you
much if you have another card that is maxed out. If you shift the debt evenly
among all credit cards, you credit score should increase. This has to do with
something called your ratio of debt to available credit. It is a loophole of
sorts, so take advantage of it.
Closing Accounts
Don’t! Many people will close credit card or other borrowing accounts when they
are done with them. This is a huge mistake. First, it hurts you because you’ve
reduced the available credit portion of your debt to available credit ratio.
Second, you lose a record of your long-term credit payment history for the
account. Lenders like to see these, so suck it up and keep the account open.
Inquiries
As strange as it sounds, inquiries on your credit report hurt you. Try to
eliminate these by challenging them through the Fair Credit Reporting Act and
limiting the credit applications you pursue. You can challenge inquiries by
ordering copies of your credit reports and following the instructions on the
report. Make sure to do this for all three credit reporting agencies – Equifax,
Experian and Transunion.
Check Your Report
The big three credit agencies must report to Congress each year. Each year they
report an astonishing number of problems with their systems. This can affect you
since accounts will appear that are not yours. If these accounts have problems,
your credit score goes down. Make sure you check your report before applying for
a loan. You want to deal with these issues before you are in escrow.
Borrowing large sums of money for a home loan can be intimidating. Avoid acting
like a dear in the headlights. Deal with your credit issues and save yourself
thousands in payments.
About the Author:
Dan Lewis is with http://www.gwhomeloans.com - a San Diego mortgage brokers
providing San Diego home loans. Visit http://www.gwhomeloans.com/services.html to learn more about options on San Diego mortgages from a San Diego mortgage
broker company. |
