Are Your Looking To Purchase A Home? Understanding Credit Scores and Repairs Should Be Your First St

If you are applying for a mortgage, you're going to have to deal with credit scores. Here's some free info on credit scores and methods for improving them.

Credit Report

Step one in the process is making sure that you have a current copy of your credit report. The Fair Credit Reporting Act grants consumers to receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you'll want to request a free report from each of the three companies. (Go to www.annualcreditreport.com)

(If you already have received a free credit report you can get all # credit reports for $1 here)

Credit Score

It's also imperative to know just what a good credit score is. Most A-Paper scores typically begin around 680, although this number may differ slightly among lenders.

Don't despair if you come up shy, there is always room for improvement. Increasing your score just 5 points can save a significant amount of money.

For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan's interest rate.

While credit repair is necessary for some, it is not the solution to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps:

1. Evenly distribute your credit card debt to change the ratio of debt to available credit. Let's say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

2. Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don't close those old accounts!

3. Keep credit inquiries to a minimum. Each inquiry into your credit history can influence your score anywhere from 2-55 points. When it comes to mortgage and auto loans, even though you're only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.

Remember, credit scores do not instantly get better. Improving them requires time and diligent effort on your part, so it's a good idea to start at least three to six months prior to submitting your application for home financing.

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. If you decide to make your own improvements, visit as many websites as possible to get information regarding credit laws and consumer rights.

For those who want to do the process themselves we recommend the DIY Credit Repair Kit. It Includes all the tools you need to repair your credit.

Diligently search through them and educate yourself to ensure that you don't sustain any self-inflicted wounds. A good place to start would be the Federal Trade Commission's website, which contains a plethora of helpful literature.