Your Credit

Avoid Foreclosure at All Costs

As we’ve all witnessed in the media this past year, some homeowners can be very hardheaded when they falls into financial hardship and are facing foreclosure on their home. Typically they will resist offers to sell their home. But while noble, this can also be thoroughly disastrous.

That’s why I think it’s critical to point out to the such homeowner that selling their property may be in their best interests. And if I could make one basic, simple appeal it would be that foreclosure must be avoided at all costs. The reason is that with foreclosure proceedings there also comes a number of catastrophic hassles that normally cause irreparable harm to the homeowner.

For example, if your home is foreclosed your credit rating is going to be devastated for a full decade. Of course, you can also seek protection against the creditors by filing bankruptcy, but bankruptcy has become significantly more difficult to qualify for as laws for filing bankruptcy have become much stricter.

Also, the damage done to a your credit rating due to a bankruptcy would make borrowing money next to impossible. That’s why it is significantly better to sell your property outright on your own terms than it is to suffer the disaster of having your property foreclosed upon.

Building Up Your Credit Score

Hopefully you understand your credit a little more after reading my last post. Now it’s important to remember that a healthy credit score can speed up the mortgage process, while an unhealthy (lower) credit score can indicate a pattern of risky behavior that could result in a collection or possible bankruptcy. Fortunately, your credit score changes over time; if you have poor credit, you can work on your credit habits to improve your overall score.Click here for more information on how you can improve your credit score.

You should check your credit score periodically to make sure that the information gathered is accurate. In fact, the Fair Credit Reporting Act requires that the three major credit bureaus provide a yearly credit report on request. You can order your credit reports online by visiting www.annualcreditreport.com or by calling 877-322-8228.

If you search online, you’ll find a number of credit report offers – most of them claiming “free credit reports”, “free credit scores” or “free credit monitoring”. These services are not part of the legally mandated free annual reporting program. Almost all of these services actually have some kind of product or service they sell at a fee. Consumers should not have to pay for services that are freely offered.

As I’ve mentioned before, your credit score is a vital part of your financial portfolio. Make sure it’s not something you take lightly, especially if you are considering owning your own home.

What You Need to Know About Your Credit

One of your most important assets is something you may not even think about much – your credit score. Your credit score affects your ability to purchase a home or refinance. But even if you don’t plan to purchase or refinance in the near future, you should still consider the importance of your credit score and keeping it in good shape.

Your credit is used to determine what types of loans or credit can be extended to you, whether you will receive approval for a loan, and what interest rate will be extended to you. The better your score, the more appealing the mortgage type and the interest rate.

Understanding your credit:

Three privately held national companies collect information about your credit – Equifax, Experian and Trans Union. Credit scores are based on a scoring system called the FICO model, which ranks credit on a scale of 300 (lowest score) to 950 (highest score). The higher the credit score, the less probability of an individual defaulting on a loan. So, lending organizations prefer borrowers that have higher credit scores.

Credit bureaus collect information, beginning with identifying characteristics, such as name, address, social security number, your employer, etc. They also collect information on debt and payment history on a variety of loans – credit cards, student loans, car loans, and consumer loans. In fact, most companies or businesses that extend loans supply the credit agencies with payment information.

This information is compiled along with any previous history of collections, information about tax liens, judgments and bankruptcies. Another important piece of information that is gathered is any inquiries for new credit – any applications for credit cards or new loans.

Consumers and their credit information is protected under federal laws. As an example, your credit score can not by affected by such factors as race, religion, gender, marital status, age, nationality, or whether you receive forms of public assistance.

Your credit score is a vital part of your financial portfolio. So if you are looking for ways to improve your credit and would like some advice, check back for my next post on how to build your credit score.

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