Mistakes to Avoid When Getting a Mortgage Loan Are you in the process of buying…
Basics On Credit
Basics On Credit
In our line of work we meet people with vastly different credit experiences and knowledge. There seems to be a lot of misconceptions about credit so we wanted to break down the basics for you.
When it comes to your credit, these key terms are crucial to understanding the process; trust and risk. The lenders are trying to determine if they can trust you to pay them back and how risky it would be to lend you money. Keep reading to dive deeper into this hot topic!
What is a credit score?
This is a 3 digit score created by running credit data through a complex formula. The credit score range is typically from 300-850. The average credit score is about 690.
What is the optimal way to build credit if I’m just starting?
One of the best practices for building credit is to start with a secured installment loan. You will give X amount of money to the bank and they will give you a loan for that much money. The benefits of this include the fact they don’t need to check your credit because it’s fully secured plus a small balance means small payments. Once you have this loan you can use this money to get a secured credit card. Now these both count as a tradeline to the credit bureau. It’s important that you actually use this credit card but that you keep the balance low as well. This shows lenders that you can be trusted and it also helps you establish good credit habits.
How do I fix my credit?
Now if you haven’t maintained healthy credit habits, there are solutions. Something to keep in mind is that not all credit repairs are made equal. An easy fix is checking out all of your current debts and seeing which ones can be paid down. Lowering these debts could raise your credit score in as little as 72 hours! (Call us for more info on this process). Where it gets trickier is when we’re dealing with missed payments, especially multiple missed payments over a long period of time.
Common misconceptions when it comes to credit
“I already know what my credit score is so I don’t need to pull it yet.” – When it comes to all these banking apps these days, it’s common to have an idea of what your credit is but it’s very unlikely that it’s 100% accurate. The formula for calculating your credit score is so complex that it’s best to find out your official score through a professional.
“I’ve filed for bankruptcy in the past so I can’t qualify.” Bankruptcy no longer has the same stigma it once had. Over the years, the economy and credit system have realized that they should not penalize the underwriting process as much as they used to. This means you can definitely recover from a bankruptcy!
“I’m already working on fixing my credit.”- Great! What’s the game plan and how are you getting this done? If you’re already working on fixing it, then having a professional’s expertise will only make the process easier and more manageable.
Did that help clear any misconceptions you had as well? Life is unpredictable, and some hardships are unavoidable. Fortunately, there are lots of options for you and as always Weber Mortgage is here to help.