Saturday, September 19, 2015

If you want to buy a house – or move up, or do some remodeling – the single greatest key to what it will cost in the long run may depend on your credit score.

“Your credit score is the gateway,” say finance experts at the Financial Industry Regulatory Agency (FINRA.) “If you want to borrow $200,000 for a fixed-rate 30-year mortgage and your credit score is in the highest category (760 to 850) a lender might charge you 3.307% interest for the loan. This means a monthly payment of $877. If your credit score is in a lower range, say 620 to 639, a lender might charge 4.869 percent, which would result in a $1,061 monthly payment – or $184 a month more for your mortgage. Over the life of the loan, you would be paying $66,343 more than if you had the best credit score.”

Clearly, the goal should be maintaining your credit score at the highest possible level. FINRA advisors suggest the three top ways to avoid sabotaging your score:
 

• Correct credit reporting errors – They won’t fix themselves, and depending on the severity of the error, you could lose hundreds of points from your credit score. Thanks to the Fair Credit Reporting Act, consumers are entitled to one free report from each of the three major credit reporting agencies (Experian, Equifax, and TransUnion) every 12 months. Get them – and if you see something awry in your credit report, alert all three agencies right away.
• Make payments on time - The longer a bill goes unpaid, the more damaging the effect on your credit score. (A payment that is 90 days late can have a more significant negative impact on your credit score than a payment that is 30 days late.) If you know you can’t pay a bill on time, let your creditors know immediately and see if you can work out a payment plan.
• Don’t max out credit cards - When you stretch your credit limits to the max, you’re negatively affecting your credit utilization rate, which measures your total amount of available credit. The balances owed on your credit accounts account for 30 percent of your score. It is recommended you keep your credit utilization below 10 percent of available credit.

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