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If you have started thinking about home ownership, you should immediately begin thinking about your credit. The first step in this process is Understanding Your Credit. Before you apply for home financing you should know that your financial credibility or credit report will be reviewed to determine how you have historically managed your finances. Your credit report provides important information that helps us make a decision on whether or not you qualify for financing.Your credit report also helps us to understand how much financing you may be eligible for. Establishing Credit If You Don’t Have Any There are a number of ways to establish credit. Open a free or low-cost checking or savings account and make regular deposits. Be sure to only write checks when you have money to pay for things. Apply for one or two credit cards and make a point of using them in a responsible manner by paying the balance each month. It is to your advantage to always have 2 to 3 open accounts reflected on your credit report (e.g., credit cards, lease payment or other account). Maintaining a Good Credit Score Make sure you pay all your bills on time. Keep your debt-to-income ratio at 20%. Excluding your rent or mortgage you should not have debt that's more than 20% of your net monthly income. Debt is calculated based on open accounts that are listed on your credit report. Reviewing Your Credit Report at Least Once a Year Did you know that you can have access to your credit report for free at least once a year? Contact the three major consumer credit reporting agencies and request your free annual credit report.
For more detailed information on credit, we recommend that you visit the following websites: 1. http://freddiemac.com/corporate/buyown/english/preparing/credit_and_homeownership/ 2. http://www.ftc.gov/bcp/menus/consumer/credit/reports.shtm
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