A Sacramento Real Estate Home Buyer recently emailed and asked for an explanation about credit scores and what the numbers mean. The home buyer wanted to know if those numbers really mattered and if anyone really looked at them. Since we have a new generation of home buyers coming up, it's important for you to know that your credit is VERY important and it follows you forever.
When you want to:
When you have a higher credit score, you get better interest rates on what you buy. The person giving you credit decides if you are a good risk or not so good.
Credit scores are called FICO scores which was named so by a company called Fair Isaac. There are 3 main credit reporting agencies that keep track of everyone's credit and they are:
Credit score numbers are assigned to each person based on how you pay your bills. The scores range from 300 to 850. The higher the score, the better risk you are and the better interest rates you get.
Here is what Credit scores mean:
It is said that 3-5 credit cards is all you should have and small balances are better than a zero balance.
There is a myth about inquiries on your credit from mortgage real estate lenders when you are shopping for a house or a car. Although the less inquiries the better, an exception is made when buying a house or a car since within a 30 day period multiple inquiries are treated as one. The reason is that on big ticket items such as cars and houses generally the buyer is looking for the best loan so an exception is made and multiple inquiries within a 30 day period are fine.
The Sacramento Real Estate Home Buyer asked how to increase his credit score...
In today's Real Estate market a home buyer wants to make sure that their credit score is as high as possible because this will help keep your payments lower since you will be receiving a better interest rate than a home buyer who has a lower credit score and either can't get a loan or finds that the loan they do get has a very high interest rate. Now, wouldn't you prefer paying less for that car or that house?
I hope this helps answer the question, does my credit score really matter?
Wendy Cutrufelli, Certified Mortgage Planner has written an article about Credit Score where she has given the home buyer an excellent source with help in cleaning up your credit score. This is worth the read.
Other Related Articles:
When Should a First Time Home Buyer Buy a House?
First Time Homebuyers Should Take Advantage of the Buyers Market
Homeowner Tips and Home Buyer Tips
First Time Home Buyers Check-off List Part I
First Time Home Buyers Check-off List Part II
First Time Home Buyers in Sacramento Congratulations!
New Home Buyer Information You Need to Know
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Sacramento Real Estate serving Home Buyers & Sellers in Elk Grove, CA, Folsom, Roseville,, Granite Bay ,Placer County, El Dorado Hills, West Sacramento, love 1st Time Home buyers, too. (916) 417-2699
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Another thing to remember is to NOT close any accounts just because you don't use them. Those accounts help in calculating what you're allowed to borrow verse what you are borrowing, and it also helps with credit history in case all the cards you're using are newer.
Also, I don't know if this is market specific, but in my area, they pull your credit when you call for home owner's insurance and your rates are based on your credit as well.
What I would like to see is an end to easy credit for college students. It often takes years for the damage done to folks credit when they get these cards.
Folks do not understand the importance of protecting their credit.
Definately true! Good article Geena and I truly agree with Lenn's perspective. My son just got out of college and it was a rare day when we didn't get a preapproved offer for credit for him BEFORE he graduated. Let's see...no income and lot's of debt...let's give him more credit...
Gena- This is a great consumer post. I too agree that the temptation to get into debt is great because of all the offers. I made a point of teaching my children how to manage and build their credit, and I must say they make me proud.
Gena, great post. But I'm still jealous that Wendy got to meet you in person first! Let's get a Northern California Active Rain meeting going!
Donna,excellent suggestion. Closing accounts is never a good for one's credit score. And invariably the consumer typically chooses the wrong one to close...the one they have had the longest!
Lenn, oh yes...the days of handing out credit cards like candy to college students who have no means of paying is in my estimation, ridiculous. It's time to rethink the responsibility that comes with credit cards. Totally agree that many do not understand the importance of good credit.
Chris, doesn't make a lot of sense to give these young adults credit when they have high debt from college tuition and no job...what are they thinking? Time to change that and get a handle on who is to receive credit cards.
Jennifer, it's a tough road for those young people who are tempted with all the credit card offers and little knowledge of how not paying on time effects their credit score...many don't think about tomorrow but only today. There is so little education about credit score...good job teaching your kids.
Catherine, we knew you would be sooooooo jealous...next time you will have to come with Wendy! It was great meeting Wendy in person and having coffee and chatting about home buyers, loan and credit scores...wish you could have been here. I agree we need to work on a get together of Northern CA. Of course, I feel as though I already know you!
Gena,
Great advice for everyone!
By the way, what does it mean when you have a score of 250? ;)
Lucky :)
Lucky, Oh my...250 is not even on the radar screen. Major work, I'd say. That is probably where the majority of the foreclosure and short sale owners will be for quite awhile.
Hopefully, between this article and Wendy Cutrufelli's article, the consumer will understand credit score and how to embrace cleaning it up.
Credit and credit repair are more important than ever with the shrinkage in loan programs. I give credit guidance on my site occasionally if you're interested.
www.GreenMortgageGroup.com
Brian, glad to hear that you offer credit help. I do hope the public can begin to understand how extremely important their credit score is and how it follows them the rest of their life. We really need more education on this BEFORE the college kids are issued all the credit cards! These are our future home buyers and they need to know how important their credit is and always will be.
Gena,
That's a solid rundown on the FICO score for the consumer. It's an integral part of our economy today and if you take care of it properly, your borrowing costs are the lowest possible. Also, keep in mind that employers and insurance firms check them for their purposes.
Great post Gena.....and an awesome comment from Lenn. I would like to see more effort spent teaching about these issues in high school.
Gena- I'm always surprised at how many buyers really don't understand what good credit means.. many think that because they can use their credit cards for lots of purchases that they have good credit.. they don't realize that all they really have is lots of debt.. Really good article... I'm bookmarking to reference in a blog I'm working on..
Diana, thank you for your insightful comment, letting the public know just how credit scores impact every aspect of their lives.
Esko, oh yes...oh so important and not to be taken lightly.
Stacy & Jackie, education is key in almost every arena that I can think of and never so much more apparent than what we are experiencing throughout the country...time to educate.
Kaye, thank you. Good to see you over here and looking forward to reading your article.