Establishing A Credit History Is Key When Applying For A Mortgage
It takes credit to get credit. Lenders prefer borrowers with low balances, a long history of on-time payments and a mix of credit utilization – for example, a car loan, student loans, and a couple of revolving accounts such as credit cards.
Perhaps you are a young professional with a high income and you are ready to buy a house, or you are a recent college graduate and have eschewed credit cards or taking out loans, so you have no credit history. Or perhaps you are recently divorced and your credit history was all under your ex-spouse’s name.
It is possible to use what is known as alternative credit from other financial records, such as rent checks, insurance premiums and utility bills. This process is time-consuming, taking as much as three times longer as a normal file, and in the end you will end up paying a higher interest rate than a person with an established credit history.
You will definitely have an easier time qualifying for a loan if you take the time to establish a credit history. You can begin by opening at least two traditional credit lines.
A credit history and credit score known as a FICO score, can be established in as little as six months if you open accounts with a credit card provider that reports to the three main credit reporting bureaus, Equifax, TransUnion, and Experian. If the major credit card companies will not approve your application, apply for a secured card. With a secured card, you give the card company a deposit, usually the same amount as the card’s limit, and use it just like a typical credit card. You can choose to pay the card off monthly or carry a balance and make payments. Just make sure you make your payments on time and keep the balance to less than 25% of the card’s limit. A good source for obtaining a secured credit card is your bank or credit union.
Your three-digit credit FICO score is a key number. Lenders rely on FICO scores to determine how likely borrowers are to make their mortgage payments on time. A high credit score, a FICO score of 740 or higher to be an excellent one, means that borrowers have a history of paying their bills on time. A low score and the assumption is they do not.
The mortgage-approval process is driven by credit and lenders want to see that you have the ability and the willingness to pay back your mortgage loan.
Wallingford PA Real Estate – Wallingford, PA 19086
