Check Credit Before Considering a Move

Up to 80 percent of Americans still think owning a home is part of the American dream, according to a recent Harris Poll. With home sales reaching the highest pace in nearly six years, it may be time to finally get packing. 

Don’t jump too fast, though.

While new rules have relaxed the credit standards imposed by Fannie Mae and Freddie Mac (two of the biggest government loan guarantors), making it possible for many young first-time buyers to take the leap into home ownership, there are some important considerations to make long before hiring the movers.

What is a credit score and why does it matter?

Holding down a steady job, paying your bills on time, keeping your credit card balances low and only opening new credit when absolutely needed are all factors that go into your credit score. While you may not see a huge difference between 698 and 700, those two points can actually end up costing thousands of dollars.

“Before applying for any loan, be sure to check the state of your credit,” said Scott Smith, president of CreditRepair.com. "Owning a home is a big part of the American dream, but home loans can be very complex, and doing all of the proper research from the beginning, including completing any necessary credit repair up front, will make the process that much simpler."

Resources such as CreditRepair.com offer a free online credit score estimator to help check your score. Anything below 620 ranks as poor; 620-699 is fair; 700-749 is good and anything over 750 is excellent.

Home loans and a down payment

While it is possible to buy a home without a mortgage, most people don’t have that kind of cash. However, you will need at least 5 to 20 percent of the sale price in cash in order to qualify for a conventional loan. 

Getting a mortgage can be difficult and frustrating, even for people with near-perfect credit. If you find yourself with a sub-optimal credit score and you are in the market for a new home, Smith suggests taking these steps before making a trip to the bank:

• Get a copy of your credit report. You are entitled to one free credit report from each of the three major credit bureaus each year by law (in some states, you are entitled to more than one free report a year). 
• Analyze your credit report. Carefully scrutinize your report to identify any errors that can help boost your score and request corrections for all erroneous information.
• Keep all credit card accounts open. Closing an unused credit card account can actually negatively affect your credit. Fifteen percent of your score is based on credit history.
• Make all payments on time. Payment history accounts for a whopping 35 percent of your credit score.
• Give yourself time. Good things do come to those who wait. Take the time to repair and build up your credit. It could save you thousands of dollars down the road.

For more tips on managing your money or your credit, visit www.CreditRepair.com.

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