5 tips to protect your credit score.

February 2, 2011

There was a time, not so long ago, when a credit score of 720 would have been enough for you to be approved for the best mortgage rates. That’s history. In today’s economy, you need to post a score of at least 760 (out of a possible 850) to be considered for those desirable interest rates, for a conventional loan. Plus, the FHA loans are more lenient with credit scores. You can qualify for an FHA loan with a credit score of 640.


It doesn’t take much to chip away at your credit score. Here are five tips to preserve your creditworthiness.


1.            Avoid making late payments.

Even one late payment, whether it’s a week or a month, can cost you up to 110 points on your credit. Pay attention to due dates and, whenever possible, pay early.

2.            Keep your balance low.

While you need to use your credit to build a history that lenders can view, don’t overdo it. Your total debt should amount to no more than 30 percent of your income. Carrying a big balance will send up a red flag to a potential lender. Pay down your balances and you should see a boost in your score.

3.            Keep your credit cards, even if you’re not using them.

You might think you’re doing the smart thing by reducing the number of credit cards you’re carrying, but cancelling cards changes your debt to utilization ratio. If, for example, you have three credit cards and each has a $2,000 limit, that’s a total of $6,000 in available credit. Let’s say you are carrying an $800 balance on one card and zero on the others. Your debt to utilization ratio is 13.3 percent, and that’s a good number. But if you cancel those other two cards, you reduce your total available credit to $2,000 and your debt to utilization ratio soars to 40 percent. You’re better served to tuck those cards away and not use them rather than cancel the accounts.

4.            Don’t open new credit lines.

When you apply for a new line of credit, the company checks your credit report, and this inquiry automatically lowers your score a bit, maybe by five points. In addition, once you open the account, you could be sacrificing up to another 15 points until you prove yourself worthy by managing this credit wisely. Don’t collect credit cards; apply for what you need and avoid the temptation to accept more.

5. Don’t default on a loan.

No one wants to default on a loan, but it happens. Home foreclosure could cost you 90 points and bankruptcy can take away as much as 250 points! If a default is unavoidable, start rebuilding your credit as soon as you can, by following the first four tips.

Don’t let your dreams of home ownership be crushed by a low credit score. If you need advice, talk to us at Stylecraft Builders. We can help get you back on track!


FHA loans make it easy to buy a home now

January 19, 2011

Are you one of the tens of thousands of renters who have avoided buying a new home because you don’t think you can afford the mortgage?

Before you continue to throw away a hefty portion of your paycheck every month, get the truth about the process of buying a new home. The Federal Housing Authority (FHA) makes it easy to buy a home. If you can afford to pay rent, you probably can afford a mortgage payment. In many cases, the mortgage payment turns out to be less than the monthly rent. Plus, you get the tax advantages of home ownership, and the added value of having an investment, as opposed to a rent expense.

FHA loans require only a 3.5% down payment. If you’re looking at a $130,000 home, that’s just $4,550 down. Compare that to a conventional loan that could require as much as 20% down.

Plus, the FHA loans are more lenient with credit scores. You can qualify for an FHA loan with a credit score of 640.

Here are a few more things you should know about FHA loan requirements:

  • You need two years of steady employment, preferably with the same employer.
  • Your income over the past two years should be the same or increasing.
  • Your credit report should have less than two 30-day-late notations in the past two years.
  • Bankruptcy must be at least two years old, with perfect credit since then.
  • Your new mortgage payment should equal approximately 30% of your gross income (before taxes).

Click here to learn more about qualifying for an FHA home loan. Then talk to us at Stylecraft Builders to see how you can put that investment toward a new home that will deliver even greater returns!

stylecraft builderswww.stylecraft-builders.com

Do you know what your credit score really is?

April 15, 2010

Credit card fraud and identity theft are hot topics in the news these days—and with good reason. In 2008, nearly 10 million people were affected by identity theft. With more people shopping online, using debit cards freely, and even utilizing smartphones to do financial business, it’s no wonder that, for many, their credit scores are at risk as well.

Despite the fact that credit card fraud and identity theft are adding to the headaches of potential homebuyers looking to secure a loan, your credit score is still affected by the fundamentals that have always either made your scores sore or sink.

• Late payments to credit cards is the number one killer of a credit score. Just one late payment alone could drop your credit score by more than 100 points.

• Carrying a big balance on a credit card doesn’t help either.

• One surprising credit score killer is actually closing a line of credit. It may make sense to close one account if you never use it and have another credit card that is active. But it can change your debt to utilization ratio, ultimately affecting your score.

• The same holds true for opening a line of credit because now you are immediately at a higher risk.

• Defaulting on a loan is the biggie, which could bring your credit score down by as much as 200 points or more.

The bottom line is you must be a vigilant advocate for your credit score as you make various day-to-day financial transactions. Having an understanding of what increase your score versus decreasing it will help you to be better prepared when you’re ready to apply for a loan for your new home.

Stylecraft Builders

Stylecraft Builders – Central Texas’ New Home Builder