The home buying process, the loan and what you should know

Once you have found the house and had your offer accepted there is a lot that needs to be completed. If you get all your paperwork into the lender in advance that is one less thing that needs to be done in the first week.

Understanding Credit

How a credit score is calculated is a mystery to many people.  Here are a few basics on understanding credit, and how your score is calculated.

Payment history is responsible for about 35% of your score. Make on time payments.

Outstanding balances are responsible for about 30% of your score.  Meaning how you manage your debt.  How much debt do you have in relationship to how much credit is already available to you?  If you have a credit card with a $1000 credit limit, it is best to have no more than 50% balance or $500 on that account. It is even better if you only have 40% or $400 on that account. 

Types of credit for a good balance;  The ideal is a mortgage, credit card and car payment.  You want to have at least one year of payment history with each of your accounts or credit lines.  If you have all brand new accounts, they will need on time payments, over time to bring your score up. 

Another 10% of your score is based on inquiries.  Each time you apply for a credit card, cell phone, or any other business that requires your social security number, they are all checking your credit.  Too many times and your score could be impacted by as much as 2 -50 points.

As for the rest, well there are still a few mysteries in the world.  Make your payments on time, don’t max out your accounts and don’t have too many accounts (that can hurt worse than too few).