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Good Credit -- Essential for the Prospective Home Buyer
Credit is a funny thing. It can be a useful tool in the hands of an informed individual, or a weight of burden to the unsuspecting. One thing is for certain, you must have a decent credit score to attain a quality mortgage loan.
We speak to hundreds of individuals each month that are in the market to buy property. Unfortunately, many of them have less than desirable credit scores, and because of this, are not able to get prequalified for a loan.
There are numerous reasons for bad credit scores: bankruptcies, late payments, large credit balances, and a host of others. There are many legitimate reasons a person may have bad credit, but frankly, most of the people we talk to have simply made poor financial decisions.
In most cases, bad credit can be easily avoided:
1. On revolving credit card balances, make sure you pay your minimum balance each month. You will even receive a slight credit boost if you pay over your minimum amount, so do it if you can.
2. Avoid "maxing" out credit card accounts. Credit cards are good to have to build your credit, but make sure you keep your spending under control. Preferably, you should be able to pay off any CC balances completely in the same month you spent the money.
3. If you need to make any big purchases, avoid the temptation to place the entire purchase on your credit card. Instead, put money aside each month until you have enough for the purchase. Remember, just because you have a big spending limit on your cards, doesn't make it your money! You have to pay every penny back plus interest!
4. Try to think of a credit card as a tool for building credit as opposed to a tool for buying the things you want. You spend a small amount each month, and pay it off immediately. This will spike your credit score, and keep you out of CC debt.
5. Make sure to pull your credit rating at least twice a year. This will give you a good feel for what your score is, and most credit score reporting services will give you a detailed explanation for why your score is where it is. If you find any errors, make sure you report and resolve them immediately. It can be long and gruesome work to get a negative mark removed from your credit record, but it can be well worth it when it comes time to buy a house.
I hope some of these tips will be helpful for you as you try to be a good steward of your finances.
You may also want to check out these free resources:
www.FamilyCredit.org
www.DebtFreeChristian.org
Justin Smith is the President of the Christian Real Estate Network - http://www.HisMove.com
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