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14 Common Credit Mistakes
Establishing credit and wisely managing your credit becomes
easier when you know how. You'll feel empowered by taking
knowledgeable steps towards good credit, and you'll be on your
way to purchasing real estate and greater financial freedom.
If you plan to finance real estate, either as a home buyer or
an investor, avoiding these common credit mistakes will help you
with your credit score and save you money in loan costs.
14 Common Credit Mistakes
1. Using expensive or undesirable types of credit costs too
much and is negatively scored.
2. Accumulating too many lines of credit or too many credit
cards causes credit report remarks like "too much consumer
credit."
3. Only paying the minimum due keeps balances too high.
4. Being maxed out on any credit card or line of credit causes
deep drops in scores.
5. Taking cash advances costs higher interest and extra
fees.
6. Exceeding limit and having to pay over-limit fees is a
negative with creditors and causes "high proportional amounts
owed" remarks on credit reports and subtracts credit score
points.
7. Paying a day or more late causes unnecessary late fees and
often increases interest rates.
8. Charging more than you can afford causes a snowball effect
of amassing debt with no easy way to pay it off.
9. Letting someone else use your credit, such as co-signing a
loan, raises your debt-to-income ratio and possibly adds "too
many consumer accounts" on your credit report, which lowers your
score.
10. Ignoring credit problems causes unnecessary negative
impact. Talk to creditors before being late and make
arrangements. This action heads off negative reporting to credit
bureaus.
11. Failure to report address changes to creditors causes
misplaced bills and late payments.
12. Using partial name, different names, initials instead of
whole name, or forgetting Sr. or Jr. causes mix-ups. Use your
full legal name to protect you from confusion with similarly
named borrowers.
13. Failure to report name changes to creditors also causes
confusion.
14. Not checking credit report frequently is one of the most
common mistakes consumers make.
You can buy real estate with poor credit, but you will save
thousands in loan costs if you maintain good credit. A bad credit
report leaves home buyers with sub-prime loans which have higher
point charges, prepayment penalties, and higher interest charges,
which therefore cost more money.
For instance, a mortgage loan of $150,000, 30-year, fixed
interest rate of about 5.72 percent costs around $870 a month.
Poor credit scores raise the interest rate over 9 percent and the
payments over $1,200.
As you see from these payment differences, good credit means
that you can finance a more expensive house with the same income,
or save $330 each month.
Credit Requirements for Mortgages
Credit needed to buy real estate is not the same as good
credit. Besides your credit score, mortgage lenders consider your
debt-to-income ratio and other credit matters, unlike other
credit grantors. Your debt-to-income ratio is the comparison of
mortgage payment, including taxes, interest, and insurance to
your total gross monthly income. Real estate lenders also
consider your employment qualifications and your overall debt
ratios. Understanding the difference between good credit and the
credit needed to obtain real estate financing helps you buy
houses!
Avoiding credit mistakes helps you get strong credit and keeps
your credit scores up.
(c) Copyright 2005 Jeanette J. Fisher. All rights
reserved.
Professor Jeanette Fisher is the author of "Credit Help! Get
the Credit You Need to Buy Real Estate," "Doghouse to Dollhouse
for Dollars: Using Design Psychology to Increase Real Estate
Profits," and other books. Jeanette and her husband chose real
estate investing to be able to care for their daughter with
special needs. While buying and selling millions of dollars worth
of real estate, the Fishers were forced into becoming credit
experts. Forget what you've been told about credit. Get the
credit you need to buy real estate. Real Estate Credit Help
Center: http://RE Credit Help.com/
MORE RESOURCES:
MORE COLLEGE CREDITChicago Sun-Times, United States - 10 hours agoDespite the current nationwide credit crunch, the State of Illinois secured $100 million for the student loans by tapping a new source -- credit unions. ... |
Boston Globe |
US travelers face credit snafuBoston Globe, United States - 5 minutes agoBy Eric Lucas All I wanted to do was buy gas, so I put my credit card in the automatic card-reader and got ready to fill the tank. ... |
Credit - Google News
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