Northern Virginia Home Buyers: Your Credit Matters
If you plan on purchasing a new home in Northern Virginia in the future, regardless of how far away that might might be, you should be thinking about your credit score right now. There are a number of factors that go into determining your score (more on that below), but understanding that credit is a tool that can take years to build and how a couple of small mistakes can immediately reverse your score, is important.
Credit: Whom & How
Credit scores range from 300-850, with the higher the number the better for you as a home buyer. Calculated by three major reporting bureaus, Equifax, Experian, and TransUnion – each of whom will provide a free annual credit report – these bureaus base your score on a number of factors such as:
- Length of Your Credit History: This refers to how long you have been using and paying off debts like credit cards, student loans, car loans, etc.
- Timing of Payments: reflected in your credit score is your history of payment timing. Making payments late or missing payments altogether can negatively affect your score. If you find yourself behind on payments, contact the lender immediately as they are often willing to work with you before it is too late.
- Number of Credit Lines: Having a high number of credit cards or lines of credit open in your name can impact your credit score calculation.
Credit & Buying a Home
In most cases, purchasing a home in Northern Virginia requires a mortgage loan. Your ability to secure that mortgage loan will be influenced directly by how high your credit score ranks, which will also serve to determine the interest rate that the mortgage lender will attach to the loan. It is advisable that you contact your lender as soon as you begin your home buying process, as this will give you insight into the prices you can afford as well as the payments and interest rates you can expect. Often times your lender will submit your information through the loan underwriting process which can result in your being “pre-approved” for a home purchase. This letter of pre-approval can be a strong bargaining chip when looking to quickly close the deal on your home!
Bad Credit: What to to do?
It is possible to repair a bad credit score, but it will not happen overnight. As a first step to repairing your credit, ensure that you are aware of ALL of the lines of credit that are open in your name. Once you know whom you have to pay, take note of the due dates and minimum payments. From here, get yourself on a schedule to automatically pay your monthly loans on time. If you have accounts that you no longer use, be sure to close them so as to avoid being hit with fees that you were not aware of.
If your credit is extremely poor, you can reach out to a credit repair agency. But this should be used only as a last result and only done with a reputable agency.