A good credit score translates into lower interest rates for you, the borrower. In the lender's view, the higher your score is, the less of a risk you are, and the more likely it is you that will pay off your debt. For this reason, those borrowers with lower scores usually end up paying higher interest rates on their loans. Greater risk for the lender, greater interest rate for the borrower.
There are several things you can do to adjust your credit score to receive a favorable review from the underwriter. Here are a few suggestions:
Here are some common questions:
"Should I pay off all my old past-due accounts?" NO, only worry about those that became delinquent within the past two years. Lenders generally do not care about very old accounts and these will eventually droop off your credit report.
"Should I close existing credit card accounts I am not using?" NO, part of your credit score derives from total credit extended. If you cancel an account, your amount of total credit extended/available decreases and your score goes down. Cut up the credit card if it will make you feel better, but DO NOT close the account.
A rule of thumb is to keep balances at or less than 30% of the available credit. Move balances around to different cards if necessary to achieve as close to this as you can. Also see if you can get your credit limit increased by the credit card company, this will lower your used credit versus available credit ratio and improve your scores.
"What if an item on my credit report is wrong?" Write a letter to the credit bureau asking that the item be investigated. They have 30 days to verify it or they must remove it. If you decide to pay off a recent (within 2 years) item that is in collection, notate the back of the check you send, “Acceptance of this check constitutes payment in full of this debt. "
As a Certified Mortgage Planner, I help clients repair their credit. Whether you do business with me or any other loan provider, be honest and tell us what is going on so we can help you.
Please visit James at http://ezmortgages123.com for mortgage needs. Apply online, check current offered rates and loan programs and more! James Hussher is a Certified Mortgage Planner and licensed to practice in all 50 states.