Credit ratings are generated by three major credit bureaus (Experian, Equifax, and Transunion). They all use differing techniques to calculate a numerical credit score that reflects your credit worthiness. The higher the score, the better your credit standing. Specific activities can have a detrimental effect on your score and can possibly prevent mortgage companies from offering you a loan. Below are advice for potential MA home buyers on credit behaviors that impact the ability to get a loan.
Credit Behaviors That Impact The Ability To Get A Loan
Paying Bills Late
Delinquencies indicate poor credit behavior and therefore will reduce your ranking. The number of days you are late (30, 60, or 90+ days) and how many times you are late also have an impact. Late payments remain on your credit report for several years.
Debts Reported to Collection Agencies
If you are behind on payments and a lender has completed their own efforts to retrieve payments from you, they will likely assign your account to a collection agency. The collection company sends information to the credit bureaus. A settlement does not clear this from your report.
Discharges
If a lender is unsuccessful in collecting the complete balance due to them, they may “charge-off” the the leftover balance. This can therefore occur if you completely fail to pay or if you settle for a partial amount. Charge-offs remain on your credit profile for seven years. New lenders will see this charge-off and debate whether you will repeat this offense.
Public Recordings
Bankruptcy, tax liens, judgments, foreclosures, and other legal actions are entered into public record and to credit bureaus. Even if you pay off these items, the initial recording will remain in your credit report. Particular items appear for up to 10 years whereas others (such as liens) never disappear. Therefore, it is important not to let issues get this far.
Advice For Potential MA Home Buyers
All of the credit behaviors that impact the ability to get a loan provided above make you a high-risk borrower and will either cause higher interest rates or completely stop you from getting approved for loans. Demonstrate conscientious behavior and it will save you time, money, and headache when it is time to purchase a property. These are the best advice for potential MA home buyers. Keep in mind that this represents only a few typical credit issues. Consult a credit advisor for information on your personal credit profile.