Almost all people buying a property today end up at the doorsteps of a mortgage institution to organize finance for their purchase. The banks or the mortgage institution would check your credit worthiness to determine whether you are eligible for a loan. One of the most widely used instrument to determine the credit worthiness of an individual is his credit score (also known as the FICO score). The credit scores usually vary within a range of 300 to 850. An individual's FICO score goes a long way in approval or rejection of one's home loan application. A healthy FICO score would not only make it easy to organize mortgage financing but also reduce the overall cost of the home loan by reducing the interest rate charged by the lender. Hence remember that as soon as the idea of buying a real estate hits your mind ensure that you file for a pre-qualification or pre-approval with a bank or mortgage institution. Not only this would help your financial health and readiness for buying a property, but also help you understand and review your FICO score.
The most important factors considered for the computation of FICO score are payment history, total outstanding amount, duration of credit history, type of credit and number of new credits. The importance of each of these factors varies and primarily the top two factors determine your FICO score in a big way. Pay attention to these two factors in case you want a tangible improvement in your credit score just as you get ready to apply for a greeneasylife.com mortgage loan.
Payment History
Make sure you pay off all the credit card outstanding. Do not get into a revolving credit as the application time draws near. Make sure to resolve any disputed amounts or transactions with your credit card service provider. You cannot afford to miss due dates for repayments towards servicing all the loans that you have availed.
Total Credit Outstanding
Higher is the credit limit available to you against the credit cards that you possess, better would be your credit score. Avoid big ticket purchases once you have decided to buy a property. The total outstanding amount on your cards and monthly amount payable on your loan should not exceed 20% of your monthly income.
There are three separate credit reporting agencies in the United States which compute your FICO score. The credit score computed by each of three agencies could vary. Most of the mortgage providers take an average of the three measures to determine your credit worthiness. The process of calculating the credit score is fairly complex and understanding and interpreting the credit score is best left to a financial planner. You are entitled to receive a copy of your credit score once very year. Review the credit score carefully and report errors or discrepancies if any. Understanding credit score is a complex procedure and professional assistance would be helpful.
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