You might not really know how bad your credit is until you try to get a mortgage. Then you will quickly realise that the low interest rates that everyone is raving about right now, rates that are a big reason why real estate prices are going up all over the U.S., don't apply to everyone. In particular, they don't apply to you! If you don't have good credit, you won't get the same low interest rates on your home loan as your neighbour who does.
Why not, you ...
You might not really know how bad your credit is until you try to get a mortgage. Then you will quickly realise that the low interest rates that everyone is raving about right now, rates that are a big reason why real estate prices are going up all over the U.S., don't apply to everyone. In particular, they don't apply to you! If you don't have good credit, you won't get the same low interest rates on your home loan as your neighbour who does.
Why not, you may ask. Here's the thing, though. If your credit score is low, banks and other financial institutions will not want to do business with you because you are a risk. So that they can lend you money, they have to protect themselves against the chance that you won't pay it back. They do this by giving you a higher interest rate so that their end of the deal looks a bit better. You, on the other hand, will have to pay more each month and will be able to borrow less money than if your credit was better.
If you don't know if you're a credit risk or not, don't you think it's time you found out? This is one of the smartest business moves you can make because it affects not only your mortgage but also your credit card interest rates, car payments, and almost every other financial deal you make.
Getting a look at your credit score
Before doing anything else, banks and other people will look at your FICO score to figure out what kind of credit risk you might be. The FICO is like your credit report card. Your three-digit FICO score is between 300 and 850. You actually have three different FICO scores, one for each credit bureau (Equifax, Experian, and TransUnion). Since not every creditor reports to all three credit bureaus, these may not show the same score.
Order all three of your FICO scores to make sure you see the same thing as your potential lenders. Pay close attention to them. You look at the total score, but you also want to pay close attention to the details. Maybe that rent check you sent in a week late last year was never recorded correctly. This will definitely have an effect on how you do overall.
If you find mistakes in the reports, make sure to get in touch with the person in charge of that record and ask them to fix the mistake. If you're lucky, a few phone calls could really change your credit score.
