Your ability to secure financing when you’re looking to buy your home in the Northern Utah area, weighs heavily on your credit score. Before the real estate “bubble burst” in 2006 money was handed out quite liberally, even to the lowest of low credit scores. Buyers with a credit score less than 500 FICO score qualified to buy a house! However, the normal score to secure a loan then was 620 or higher.
Credit scores tell a lot about your purchasing habits whether you want to them to or not.
Now after six years of extreme tightening, lenders have tightened their mortgage requirements for buyers and are requiring a credit score of 720 or higher.
But don’t despair, it’s not as bleak and hopeless as it may sound …
The good news is that the median credit scores are getting better! Currently 18% of the population has scores of 800 to 850! The flip side is 15% are below 550. Back in 2006, the median score was 723, 20% of the population were below 620 and 20% were above 780.
FICO, two biggest factors are found in a credit score – payment history and the amounts owed. So, how do you use these two factors to increase your credit score?
Reduce your balance(s) on your credit cards or pay it off – DON’T CANCEL THE CARD, THOUGH!!! It will actually damage your credit, if you cancel cards – it’s okay to let it sit out there. Or charge just enough you can pay off per month to keep you credit clean.
One thing to note, is if any of your debt is in collections, that will definitely lower your score. One train of thought is to reduce your amounts on your accounts that aren’t delinquent and then work on your delinquent account. It isn’t going to go away by ignoring it.
If you take advantage of your annual free credit score report, you may find there are mistakes on your report – past bills you actually paid off, or entries that actually aren’t yours. If these things show up on your credit report, even if they are yours or not, it will lower your score. It is very important to correct these mistakes to increase your score! But it may take a while to get correct it.
If you have some dings on your credit report which results from bankruptcies, short sales or foreclosures, these will stay with you up to 7 years. Start fresh – stay on top of current payments and when you do secure any debt, keep it current or pay it off.
If you HAD a history of late or slow payments, but have been current for a couple years, lenders will look more at the recent history than what happened in the past.
If you’re thinking about buying and don’t know what your credit score is, contact us today! Our team has local financing experts to help you every step of the way. You just may be surprised to see your score is high enough to start looking for your home now!