Credit scores, along with your overall income and debt, are a big factor in determining if you’ll qualify for a loan and what loan terms you’ll be able to qualify for.

1.       Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.

2.       Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score.

3.       Don’t charge your credit cards to the maximum limit.

4.       Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year.

 5.      Don’t purchase big-ticket items for your new home on credit cards until after the loan is approved. The amounts will add to your debt.

 6.      Don’t open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score.

 7.      Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8.       Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, “Knowing and Understanding Your Credit,” visit http://www.homebuyingguide.org .

Reprinted from REALTOR^® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS^®

Credit scores range between 200 and 800. Scores above 620 are considered desirable for obtaining a mortgage. These factors will affect your score.

1.  Your payment history. Whether you paid credit card obligations on time.
   
   
2. How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended.
   
   
3. The length of your credit history. In general, the longer the better.
   
   
4.  How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly.
   
   
5.  The types of credit you use. Generally, it’s desirable to have more than one type of credit—installment loans, credit cards, and a mortgage, for example.

 For more on evaluating and understanding your credit score, go to http://www.myfico.com.

Reprinted from REALTOR^® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS^®

Copyright 2005. All rights reserved.                        www.REALTOR.org/realtormag