Your Credit Score

One of the biggest things that influences whether or not you qualify for a home loan or any type of loan is your credit score. It's a rating that lenders and credit firms use to determine if you qualify for a loan; what type of loan and it can also influence your interest rate.

You will often hear this referred to as a FICO score. There are three credit bureau agencies that most lenders use; Experian, Equifax and Transunion. Your score will vary among the three. You can go online and find out what your scores are with each credit reporting bureau; it will cost you around $16 or you can have your bank or lender run a report for you and they will charge a nominal fee. You can obtain a free report without the scores from the three agencies once a year from annualcreditreport.com and then pay the additional fees if you want to receive each agency's report.

First of all, you need to have credit to establish credit. So even though you may not think it makes sense, it is good to have at least one credit card, charge something on it every month and then pay it in full by the due date each month. Or if you've purchased a vehicle and are making monthly payments, that will also help you establish credit.

Your credit score also takes into consideration whether or not you pay your bills on time, including utilities, credit card payments, car payments, mortgages and so on. And if you have balances on your credit cards, you want to keep them at 33 to 50% of the credit limit.

If there are blemishes on your credit including late payments, judgements, collections, it will not bode well for you when applying for a home loan, place to rent, an electronics purchase, etc. So it makes sense to monitor your credit so you know what is showing up on your report; there may be mistakes and then you can contact the parties reporting those mistakes to correct them. There are people who are experts in repairing credit but if you have the time and tenacity, you can do it yourself. There are plenty of online resources to explain your credit score and how you can make sure it's accurate. If it's the difference between paying a higher interest rate on a purchase or qualifying for a home loan, it makes sense to be aware of what other parties are using to determine your credit worthiness.