Tips For Better Credit Rating
Your Credit Rating is the key factor in the type of interest rate a lender will extend
toward a mortgage application. Here are five tips that will help you improve your credit scores.
Payment History. Your payment
history accounts for approximately 35% of your scores. Lenders are concerned with how you paid your financial obligations
and whether you paid on time. Paying your bills on time is the single most important thing you can do to raise your
score over time.
Amounts Owed. The amount
of money you currently owe accounts for about 30% of your scores. Owing money doesn't mean you're a high risk.
However, high balances or maxing out your credit limit may look as if credit is controlling you instead of you controlling
it. Try to keep the balance owed well under 50% percent of your limit.
Length of Credit History. The
number of months an account is open contributes about 15% of your scores. If you have revolving charge cards that you
no longer use, you may not want to cancel them. Using them once in a while will keep them active and will increase the
lenght of your credit history record.
New Credit. New credit accounts
for approximately 10% of your scores. Opening several credit accounts in a short period of time can lower your score
as it represents a greater risk to your lender. Each time you apply for credit a lender request a credit report called
an inquiry. A lot of inquiries in a short period of time will lower your credit scores. Try to refrain from opening
credit accounts in a short period of time and limit the number of inquiries that will lower your scores.
Types
of Credit In Use. Types of credit determines 10% of your scores. Whether you have three
credit cards, a mortgage and two auto loans or you have two retail cards and one installment loan does not matter.
Scores are rated on your mix of credit accounts and how many you have of each type. It is not necessary to have one
of each to get a high score, though a good track record with different types of credit will help. Only open new credit
accounts that you need. If you set out to apply for a wide variety of credit types in hopes of raising your score, it
can backfire and actually lower your score.
If you follow these tips and apply the information to your own credit situation, lenders
will look at how you are managing your credit and look favorably on the credit report. This is not a guarantee that
you will get a low interest rate, but may have the impact of improving your existing credit scores to a higher level.
Loan Application Tips
Here is a list of documents you'll need to apply for
a loan:
1. A list of your financial obligations.
2. The addresses of your current and past residences
for a two year period. If you rented, include the name of your landlord. If you owned your home, include the name
of the mortgage holder.
3. The names, addresses and phone numbers of all your employers
for the past 2 years.
4. Your most recent pay stubs for 30 days and W-2 tax forms
from the past 2 years.
5. Any documents that support your claims of income
from sources such as Social Security, pensions, interest and dividends.
6. If you're self-employed, two complete tax returns for
the past 2 years, plus financial statements for both the company and yourself.
7. A copy of your divorce decree and settlement agreement
if you're divorced and you claim or are paying alimony and-or child support.
8. Three months of original bank statements and a written
explanation of any large deposits.
9. The purchase and sales contract. If you find a
house before you apply for a loan.
