First Time Home Buyer

Before first time home buyers can positively affect your credit score you must first be able to understand what the report it and how the score is appointed. A credit score is given to you based on your credit report obtained from one of the 3 major credit reporting agencies. Your credit score is intended to reveal the likelihood you will default on your loan or declare bankruptcy. To obtain the credit score, a borrower is compared to other consumers that are similar to them. A borrower who has two late payments over 30 days is scored against comparable delinquent-payers. The borrower is graded according to risk variables used by the scoring model and will is ranked within the group of comparable borrowers. Credit scores generally range from 300 to 850 with the average credit score in the United States being 698. FICO is the most widely used credit scoring model and basis its scores on 5 criteria:

• Payment History: 35%
• Amount Owed: 30%
• Credit History Length: 15%
• Amount of New Credit: 10%
• Mix of Credit: 10%

To maximize your positive credit on your credit report you will want to make sure you pay all of your bills on time every month. You will also want a healthy mix of credit such as a car loan, student loan and credit cards. Credit of just credit cards does no make a sound credit score. Pay down your bills so that you have 30% of the credit limit in use. A lender does not want to see your credit cards maxed out, nor do they want to see them never used.

Essentially after running your credit report you will want to look for items that are incorrect and dispute these immediately. If there are items on the report that have been paid off call the institute and inform them that they need to have the credit agency mark this as paid-in-full. Strive for a mix of credit and pay down your bills. If you have a lot of medical issues on your credit report make sure you are at least making regular payments will help the lender see you are responsible in paying your debts.

Allow at least 6 months to start seeing a difference in your credit score when you are working to positively affect it. Note that disputing an issue will immediately remove it and will have a good impact on your credit score quickly. Your credit report and work on your credit score should be your first step in any large purchase such as an auto loan or a mortgage. The last thing you want to do is find that perfect house, fall in love with it and find that your credit report has issues that need to be addressed first. Get your report; find out your score and work to improve it first. The better your credit score is the better loan and interest rate you will be able to get making your overall mortgage payments lower.