Real Estate Search Direct

What is a good credit score?

Many first time home buyers have this question on their minds.  Having a good credit score will not only help you qualify for a mortgage in today’s credit tight market, it can also save you thousands of dollars.

Homer Buyer thought his credit score was good.  He knew he didn’t have any late payments, bankruptcies, foreclosures or judgements against him.  Those are the things that ding your credit, right?

That is partially true, but there are other things that can lower your score as well.  Homer had been looking at cars and applying for credit cards and charge cards a lot recently.  He had often had creditors check his credit to see if he qualified.

Each time Homer had his credit score checked by a creditor, it lowered his score a little.

Homer also had one credit card that was near his credit limit.  He paid it off every month, but he used almost all the available credit each month.

Each time the credit card company sent him a statement, they also sent a copy to the credit bureaus that showed that he had nearly maxed out his card.

If he had paid the full balance a day before the statement closing date, instead of paying after he received the statement, his score would be much better.

There were also things on Homers credit report that he never even suspected.  He found out that he had a foreclosure on his report for a mortgage on a property he knew nothing about.

It turned out to be a  mistake made by one of the credit bureaus, but it seriously lowered his score before he had it corrected.

When Homer first started looking into getting a mortgage he found out about the erroneous foreclosure and other factors affecting his credit score.  His score when he started was 650.

This was the middle score of the three major credit bureaus.  That’s what most lenders use to determine your credit worthiness.

Here are some pointers to make sure you don’t have any surprises on your credit report.

• Check your credit report frequently
• Pay your credit cards before the statement closing date
• Don’t request a lot of new credit right before looking for a mortgage
• Keep your total balances less than 50% of your total available credit
• Don’t close accounts you aren’t using
• Most importantly, never make late payments

You can get a free credit report from each of the three major credit bureaus once a year.  Don’t get all three at once.  Instead get one from a different bureau every four months and you can keep an eye on your credit year round.

This will also help to alert you of possible identity theft.  If any new accounts or inquiries show up that you don’t recognize as your own, contact the reporting credit bureau immediately.  If it is a case of identity theft you will want to contact the Federal Trade Commission as well.

If you pay off your credit card balances each month, pay just before the statement closing so the creditor doesn’t report  a high balance  each month.

Minimize the inquiries to your credit.  When shopping for a mortgage, get your own credit report and ask them to use yours for a quote.  The lender you choose to use will eventually want to check your credit themselves, but until then try to limit the number of hard inquiries.

Note: checking your own credit report does not affect your credit score.

A big part of your credit score is your credit usage.  Keep your balances totaling less than 50% of your total credit limit to have the least impact on your credit score.

Closing accounts you don’t use will reduce the total available credit you have, so if you are carrying a balance it may put you over the 50% mark of your total available credit.

Closing an account may also reduce the length of your credit history which will have a negative affect on your score.

So, what is a good credit score?  A score of 680 used to be considered a good score, but today many lenders are requiring a 720 to 750 score to qualify for a mortgage and they keep getting stricter requirements all the time.

If your credit score needs help – Repair Your Credit.

Allen Davis
RealEstateSearchDirect.com