Do not discover how bad your credit truly is until you apply for a mortgage loan. You will quickly comprehend that the low interest rates everybody raves about these days, the rates that are usually a large component of the rising prices of real estate across America, don’t apply to everyone. In particular, they don’t apply to you! Should you have bad credit, you’re not going to receive the same low interest rates on your home mortgage loan that your neighbor with good credit will.
Why not, you may ask. Well, here’s the thing. If your credit rating is poor, banks and other financial institutions consider you as a risky business partner. In order to lend you money, they must insure themselves against the risk that you may default on payments. They do this by offering you a higher interest rate so their end of the deal appears a bit sweeter. With regard to you, though, it means higher monthly payments and you can afford to borrow less money than if your credit was better.
If you don’t even know if you are considered a credit risk or not, don’t you think it’s time you found out? This is just about the wisest moves you can make, business wise, as it has an effect on not only your mortgage but the interest rates you get on your credit cards, car payments and virtually every financial agreement you enter into.
Checking your credit rating
When banks and others need to ascertain which kind of credit risk you may well pose, they will consult your FICO score prior to doing anything. The FICO is just like a report card of your credit. Your FICO score is a three digit number ranging from 300-850. You actually have three separate FICO scores, one for each credit bureau – Equifax, Experian, and TransUnion. These may not show the same score, given that not every creditor reports to all three credit bureaus.
In order to make sure you see the same thing that your eventual creditors are seeing, order all three of your fico scores. Examine them carefully. You look at the total score, of course, but make sure that scrutinize the details carefully. Possibly that rent check last year that you sent in one week too late was never registered properly. This will definitely affect your overall score.
Should you come across any errors in the reports, ensure that you contact the ones responsible for that specific record and ask them to correct the entry. Should you be lucky, several phone calls may make a real difference in your credit score!