By: Trish Potts, Consumer Credit Counseling Service of the Inland Northwest
There are three major credit-reporting agencies that keep track of your payment history with your creditors. By Keeping track of this history, the credit bureau can report to your future lenders how capable you are of paying your bills on time. Your credit report will contain information on your address, employment, public records collections, debts and how many times you have requested credit. You can obtain your credit report by contacting:
Equifax (509) 324-1287 (Spokane area only)
Trans Union 1-800-916-8800
Experian 1-800-392-1122
2. Know your score.
The credit bureaus have compiled a system that enables them to predict your future and how you will pay your bills. They call this process Credit Scoring. The higher the credit score you have the better the credit risk you are. Mortgage lenders rely on your credit score as a key component in approving your loan application. Credit scores will range between 300 to 900. Minimum score requirements lenders use will vary. The type of mortgage you are requesting will have an impact on the score the lender will require. Most lenders will want a minimum score of 640.
3. No credit, no way!
If you have never used credit you may have difficulty obtaining a mortgage. Since you haven't used credit your lender has no way to know that you can repay your loan. You can build a credit history by obtaining copies of your paid bills such as utility and phone bills and rent receipts. You can request letters of reference from these agencies and your landlords. Ask them to include information as to when you opened the account and that your payments have been received on time and in full. You can present this information to your lender and they may consider it in your application. You can also ask the references to report this information to the credit bureau.
4. Bad credit, stay away!
If you have a history of paying your bills late or not at all you probably won't be able to purchase a home right away. Do not fear, you can turn this delinquent history around given enough effort and time. The best way to solve delinquencies on your credit report is to start making timely payments. You should contact your creditors and make arrangements to bring your accounts current and then maintain a regular payment schedule. If you can not do this on your own, you may want to seen the advice of a non-profit credit counseling agency. You also have the right to add a 100-word statement to your credit file explaining the reason for any past delinquencies at no charge to you.
5. Well managed credit, come to stay...
The best way to manage your credit is to budget carefully, pay your bills on time and do not over-extend yourself. This is all easier said than done. When developing a budget you should look at all expenses incurred in a year. You should include things like hair cuts, clothing, auto maintenance and gifts when setting up a budget. There are many great books on the subject of budgeting. Check your library or with a non-profit credit counseling agency for assistance. Always pay your bills by the expected due date and when possible, pay more than the minimum amount due. When looking for financing, whether it is a loan or a credit card always be aware of interest rates, fees, total amount financed and payment amounts. You should also be aware of how long you are agreeing to make payments.
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