Get Your Credit Score Before Applying for a Home Loan

The mortgage crisis of 2007-2008 is the direct result of millions of consumer getting talked into mortgage loans that they did not need and could not afford.

If you have difficulty paying your property taxes or making the necessary repairs to your home, high-pressure salesmen may try to fast-talk you into a bad loan with many unnecessary fees and hidden charges. Don't fall for them

First of all get your CREDIT SCORE and make a realistic assessment of your credit worthiness.

Did you know that the three main credit reporting agencies in the United States are bound by law to provide you with a FREE report of your credit, once a year? But the report is not automatic and you have to ask for it. Here is their contact information:

Equifax: (800) 685-1111, www.equifax.com;
Experian: (888) 397-3742, www.experian.com/consumer; and
TransUnion: (800) 916-8800, www.transunion.com/index.jsp.

Your credit will range between 300 to 850. The higher the score, the better is your credit rating and better terms you can get for your loan.

A credit rating under 500 spells trouble. That's when you will be forced to accept stiff terms by the private mortgage lenders since most banks will try to avoid lenders with credit score that low.

If your credit score is 700 and above, you should be able to get a mortgage loan with acceptable terms.

Should you pay off your credit cards with home equity loan?

The next time your credit lender suggests you take out a home equity loan to pay off your credit card debt, think twice before quickly jumping on the offer.

Why?

Because if your cash flow is limited and you end up defaulting on your credit card debt, a credit card company cannot foreclose your property. But if you cannot pay your home loan, the mortgage company can foreclose your house and take it away from you.

Thus those two different types of debts have very different results if and when disaster strikes. Consider that before taking out a home equity loan.

(This article is written for information purposes only. Before making a financial decision please consult a licensed professional.)

Credit Card Accounts - Should You Close Them or Not?

Many of the people that I talk to about improving their credit often confide in me that they've just spent the last year or more paying off some old credit cards. Now that the account is fully paid they proudly announce that they've just closed the account so that they won't be tempted to use the credit card again and rack up a bunch of bills that they can't afford.

Then they ask, "This is should really help my credit, right?"

In fact, they are both right and wrong.

When examining your credit, lenders are looking to see if you are using credit wisely. Paying off your debts is great.

If you are paying the minimum amount that you've agreed to pay on time, lenders would be very satisfied with that.

They also would like to see that you have the capacity or the ability to use credit responsibly. They can easily understand that if you have open credit cards with little or no balances on them.

CAUTION -- closing an old credit card account that was paid and is now in good standing will actually hurt your credit in the short-term since you would no longer have the ability to use credit with that account.

So, after you've paid down or paid off an old outstanding balance on a credit card, the best thing to do is to put your card away and store it in a safe place but do NOT close the account. This will demonstrate that you are wisely using your open line of credit.