You've spent all the time examining your finances; and you've figured out all your credit card debts and your car payments; and you've been smart about it. You've looked a calculator; you've done your math, and now it's time to try and get a home... You start applying, and to your horror, your credit is awful, much lower than you expected. Where did you go wrong?
One of the biggest mysteries in the world is how credit works; and how to get the absolute best score. Additionally, one should never underestimate the value of working towards or having good credit. Whenever you go to buy something expensive and you're looking to maybe spend outside of your immediate means; a good Credit score could be the difference between not even being considered for a loan under any circumstances; or getting a great, expansive loan at the most affordable price with great interest rates. There are many instances when having excellent credit makes things cheaper; like car insurance, or renting, or investing in a credit card. Furthermore, most don't know what really affects the value and cost of their credit, and all of their insurances, or even their employ-ability in some cases.
The point is; if you ever need a student loan, a car mortgage, a loan for a boat or large expenditure; or in this case the Mortgage Loan on a nice, new house that you've got the potential to settle in, start a family and make your own- and without good credit you're not going to work toward that goal at all. The better your credit, the better your chances are of getting those necessary funds, affecting the costs of loans, and building up a repertoire to get that dream house you're imagining. The only way to achieve this goal is to understand how credit reporting and scoring work; how to go about getting a credit report, what you can dispute and how to write a dispute letter; and finally understanding what you need as far as credit is concerned to get a home loan for that beautiful piece of land you're looking at. Consider your credit score your GPA; and just like when you get grades, the higher they are, the better they are. Credit Scores are numerically based, just reporting raw data that focuses primarily on individual borrower behavior. Credit Scores are considered quick, accurate, consistent and objective to determine the quality of the recipient of a loan; and the scoring system was developed by a corporation called the Fair Issac Co., that statistically derive your worth through a mathematical formula that provides numeric predictions that indicate how much of a risk you are.
Often people tell you that if you simply pay your bills on time, and never get reported to collections, then you'll be fine. This is sound advice since you don't want bills to go to collections- but these days it's simply not enough to just be responsible and pay your bills. They also want to know how prompt you pay your bills, the total amount you owe, how much you owe on all outstanding credit cards and how old those accounts are, how many credit cards you have as well as how many inquires for credit cards; and a whole lot more, including:
-proportions of credit balances to available credit limit
-number of accounts created within a years time
-the number of accounts that deal with your finances
-any negative factors imaginable: serious delinquency, derogatory public records, anything turned in to collections, bankruptcies, student loan defaults, even foreclosures.
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