10+ Common Credit Mistakes
You
can buy real estate with poor credit, but you will save thousands in
loan costs if you maintain good credit
Establishing credit and wisely
managing your credit becomes easier when you know how. You'll feel
empowered by taking knowledgeable steps towards good credit, and you'll
be on your way to purchasing real estate and greater financial freedom.
If you plan to finance real estate, either as a home buyer or an
investor, avoiding these common credit mistakes will help you with your
credit score and save you money in loan costs.
14 Common
Credit Mistakes
1. Using expensive or undesirable types of credit costs too much and is
negatively scored.
2. Accumulating too many lines of credit or too many credit cards
causes credit report remarks like "too much consumer credit."
3. Only paying the minimum due keeps balances too high.
4. Being maxed out on any credit card or line of credit causes deep
drops in scores.
5. Taking cash advances costs higher interest and extra fees.
6. Exceeding limit and having to pay over-limit fees is a negative with
creditors and causes "high proportional amounts owed" remarks on credit
reports and subtracts credit score points.
7. Paying a day or more late causes unnecessary late fees and often
increases interest rates.
8. Charging more than you can afford causes a snowball effect of
amassing debt with no easy way to pay it off.
9. Letting someone else use your credit, such as co-signing a loan,
raises your debt-to-income ratio and possibly adds "too many consumer
accounts" on your credit report, which lowers your score.
10. Ignoring credit problems causes unnecessary negative impact. Talk
to creditors before being late and make arrangements. This action heads
off negative reporting to credit bureaus.
11. Failure to report address changes to creditors causes misplaced
bills and late payments.
12. Using partial name, different names, initials instead of whole
name, or forgetting Sr. or Jr. causes mix-ups. Use your full legal name
to protect you from confusion with similarly named borrowers.
13. Failure to report name changes to creditors also causes confusion.
14. Not checking credit report frequently is one of the most common
mistakes consumers make.
You can buy real estate with poor credit, but you will save thousands
in loan costs if you maintain good credit. A bad credit report leaves
home buyers with sub-prime loans which have higher point charges,
prepayment penalties, and higher interest charges, which therefore cost
more money.
For instance, a mortgage loan of $150,000, 30-year, fixed interest rate
of about 5.72 percent costs around $870 a month. Poor credit scores
raise the interest rate over 9 percent and the payments over $1,200.
As you see from these payment differences, good credit means that you
can finance a more expensive house with the same income, or save $330
each month.
Credit
Requirements for Mortgages
Credit needed to buy real estate is not the same as good credit.
Besides your credit score, mortgage lenders consider your
debt-to-income ratio and other credit matters, unlike other credit
grantors. Your debt-to-income ratio is the comparison of mortgage
payment, including taxes, interest, and insurance to your total gross
monthly income. Real estate lenders also consider your employment
qualifications and your overall debt ratios. Understanding the
difference between good credit and the credit needed to obtain real
estate financing helps you buy houses!
Avoiding credit mistakes helps you get strong credit and keeps your
credit scores up.
(c) Copyright Jeanette J. Fisher. All rights reserved.
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