Your Credit Report

Few things are as important than your credit when it comes to buying a home. The first thing a lender will do is review your credit report to get your FICO score. This is a history of money you have borrowed in the past and how you have repaid those debts (or not!). It contains a list of debts such as credit cards, car loans, student loans, and more. It shows any items that have been referred to a collection agency. It lists other public record information such as liens or bankruptcies. And, it documents inquiries about your creditworthiness and whether you were approved for credit or not. Your credit report is constantly updated and most information expires after 7 years (10 years for bankruptcies). This credit information then helps generate a computer-derived number that indicates your risk as a consumer. This is called your credit score. Your credit history and/or your credit score is used to decide whether your loan is approved and the interest rate you qualify for.Factors that make your FICO score and credit history

If You Don’t Have Credit
If you haven’t established credit, it’s time to get started. Perhaps apply for a credit card or two, and be sure topay them off each month. Once you’ve done this, you’ve started to establish a credit history. Next, apply for store credit purchase such as an appliance, or a TV. Do this even if you have the cash to pay for it. When the first bill comes, use your money to pay it off in full. Buying on credit and paying it off will help your credit, since paying cash does not.

If You Have Bad Credit
It can take awhile to improve bad credit, but it is possible. Since credit scores reflect much of your most recent activity, the first thing you should do is to be sure to pay on time, never late. Pay all of your debts, even if it’s just the minimum. Never pay less than what is due. And, don’t max out your credit cards because it indicates you can’t afford your lifestyle. One of the best things you can do is to make a budget to help with your monthly expenditures, and them practice it everyday. Also, start a savings account and make it part of your montly budget. You will need money for a down payment, and act as an emergency fund if you lose your job or source of income.