Saturday, March 17, 2007

Your Credit...

Seeing as how we live in the States, unlike Nigeria, this is a credit based society, most everything, your job, purchases etc is based on the ability of having decent credit. Let's face it if your credit sucks, most times, you are SOL!!

I read a few articles today that speak to this fact when regarding home mortgages. Over the past few years lenders have come up with creative ways to approve not so stellar credit owners for loans and now it is coming back to bite them in the tushy.

A few tips to making sure your credit is up to par:
  • In most states, you are entitled to a free credit report from the major credit bureaus, Equifax, TransUnion and Experian. Please take advantage of this offer. Knowing about your credit and paying attention to changes can make or break your chances of making a credit based purchase.
  • Sign up for credit monitoring services, these services offer free credit reports including your credit score, to say the least, for a nominal fee, it is very much worth the expense. Your bank, or credit card company offers these services too e.g Identity Monitor By Citi.
  • Live beneath your means i.e. Just because you can afford a Mercedes-Benz if you work a little extra overtime does not mean you should go out and buy it; put the extra money you will have saved by buying a less expensive but cost effective vehicle in a Savings account or CD(Certificate of Deposit). Also, if you do not need a car do not purchase one, if you must, buy a used, reliable vehicle and pay cash!!! That car loses value the minute it is driven off the lotunless it is an antique.
  • Having no credit is almost the same as having bad credit so definitely get a low interest, low risk credit card that will jumpstart your credit reporting, be religious with the payments. Always pay more than the minimum required.
  • Create a budget.
  • Use Online Billpay.

There's more but those are some immediate ones.

If you already have bad credit, most people prefer to leave it derogatory until the seven years run through but I completely disagree.

  • I suggest contacting your creditors and working out a payment plan. Even though you have stopped paying those bills does not mean they are not consistently accruing interest. By contacting your creditor, you can get them to stop charging that extra interest, work out some payment plan and after paying it off, the creditor can use their discretion in contacting the credit bureaus and reporting it as a positive, instead of leaving the account as a negative.
  • Try to get a secured credit card, those that require you to open a savings account to attach to the credit card; Now, I don't mean go everywhere applying for credit because that is a NO, NO. The more your credit gets pulled the more points get taken off.
  • If you still have open trade lines, please try as much as you can to pay more than the minimum due; if possible try to renegotiate your interest rate.

Regarding your mortgage loan, do not let your mortgage broker force you into taking a loan that puts you too close to your limit and out of your comfort zone, be realistic. Your monthly payments should not be more than 30% of your monthly income. Try as much as you can to put down atleast 20% of the Sales price, if you can.

Do not mistake their zeal for compassion, they want that commission, they will come up with creative means of qualifying you but you know your pocket.

Before you contact your Real Estate Agent, you should have already talked to your Mortgage Banker and been pre-qualified and pre-approved with your interest rate locked in, there should be no surprises.

We all want that piece of the American Dream but if you educate yourself and prepare yourself, you can protect yourself from a Bloody nightmare......savvy!

Read articles here and here.


Fred said...

Nice, L! I'm going through some of these things right now, and this is all good advice.

Lolita said...

Cheers Freddie, I'm happy you find the information useful :)