Getting prequalified before looking for a home and especially prior to submitting an offer is mandatory. What can be done to prepare a prospective buyer before getting prequalified? The answer is to become credit worthy. How does your credit score influence your prequalification? Understanding how credit bureaus measure your credit worthiness is a good place to start.
How Experian, Transunion and Equifax see you
Your lender will pull your credit scores to evaluate your ability to qualify for a loan. Wouldn’t it make sense to know how these credit scoring agencies evaluate your credit worthiness? Your credit score can also affect which loan programs are available to a buyer. For example, FHA, Conventional and Jumbo loans all have minimum credit score requirements. Watch the following video for more information about prequalification and your credit score:
One of the best websites to see how your credit worthiness is perceived is www.annualcreditreport.com. Use this to periodically check your payment history and amounts, liens, etc. Dispute any inaccuracies.
Your FICO score will be used by most lenders to determine which loan program is available and what your mortgage interest rate will be. FICO scores have five elements. 1.) Payment History. 2.) Credit Utilization. 3.) Length of Credit. 4.)New Credit. 5.) Credit Mix. Of these, payment history is the most influential at 35%. Missed or late payments can also have serious consequences to your score since they can remain on your history for up to 7 years. Make sure and put in a system to ensure payments are made on time. Next is credit utilization. Do you max out your credit cards every month? This will negatively impact your utilization and FICO score. Scoring agencies like to see you use 30% or less of the available credit, and the lower the better. Length of credit is something that can only be improved with time and is a reason why cancelling old credit cards may not be the best decision.
All of this is can assist a potential buyer avoid problems when they sit down with a lender to become prequalified. When you’re ready, and want to be notified of homes automatically, click on receive properties as they come on the market.