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Credit Score Is NOT Everything

Posted on June 1, 2015 by Ray Williams (NMLS #216267).

Your credit score is not everything when looking to purchase or refinance your home! Don’t get me wrong it is important BUT there is more to your credit than JUST the score! So what does that mean? There is really no easy way of saying this, your credit score is a reflection of your creditworthiness.  The lower your score, the higher the risk your are in the a bank’s eyes.

First things first, you need to have an idea of what your FICO score is and should be monitoring your credit. You should be aware if you have collections, judgements and/or any other negative reporting.  If you have NO credit, meaning you don’t have any good revolving credit such as credit cards, student loans, car payment, etc., then you need to know your FICO score will not move in a positive direction.  Using credit it important but more importantly is how you use it, how long and how much you use on a consistent basis, along with making your payments on time.

Now, keep in mind investors (banks) don’t just look at your FICO scores, your FICO score is just ¼ of the evaluation.  Credit scores are a reflection of how disciplined you are with your lines of credit.  Do you make your payments on time?   When you show late payments, repossessions, evictions, collections, judgements, etc.  And if you have had these in the past, what are you doing to rebuild your credit?  Again, as I mentioned before, what is your creditworthiness?

If you can take away anything from this, is would be that you …Check your credit, make your payments on time, don’t overextend your credit (max out lines of credit), and avoid collections & judgements!  Check out this article on the 10 crucial credit questions from MoneyTalks.

Every year you are allowed to receive a FREE copy of your credit report.  So go to each credit bureau and get it, Transunion.com, Experian.com & Equifax.com.  You don’t need to sign up for a regular service and get monthly monitoring, just get your one free copy every year.  Review your credit report and make any needed corrections.  If you would like to follow your credit I would suggest www.myfico.com .

This will help you in knowing if you are ready to take the next step and meet with a lender to get pre-approved.  **KEEP IN MIND, prior to setting up a meeting with a lender make sure you have some money in the bank!! In this market you can not purchase a home with no money down!! Read more about “can you purchase a home with no money down?”.  Also keep in mind that the higher your score the more loan programs that may be available to you, including lower rates.

If you need any assistance or have any questions please don’t hesitate to contact us.  We are always happy to help.

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