For the first in this series on Financing 101, San Clemente Coastal Living thought it would be appropriate to address how important your credit score is to getting approved on the the purchase of a San Clemente home or condo for sale.  The first thing as a buyer you need to take a look at is your financial profile, or in other words, your credit score.  Credit scores range from 300-850 and borrowers with a score of 700 or above are typically considered prime borrowers.  So lets break down how your credit score is calculated and how you can improve it.

First, 30% of your credit score is based on what’s known as your credit utilization ratio.  This is how big your balances are compared to how much credit is available to you.  It’s recommended you leave 50% of your available credit open in order to not ding your credit score.  Therefore, one of the fastest ways to improve your credit score is to pay those balances down.

Another 30% of your credit score is based on your payment history, and therefore, paying on-time is critical.  Late payments will stay on your records for as long as seven years, however, your credit score will begin to improve after six months of on-time payments.   After one year of on-time payments, you should see a huge leap in your credit score.

10% of your credit score is based on how many times you apply for new credit, and therefore, opening new credit lines before you want to refinance or take out a mortgage could prevent this from happening.

 The rest of your credit score is based on length of credit history among other factors.  One thing to keep in mind, however, is to review your credit report annually for errors as a recent study found that over 75% of credit reports contained some sort of error.  Having an error on your report could prevent you from buying the San Clemente home of your dreams.  With this being said, you are entitled to a free credit report every 12 months and can obtain it off FreeCreditReport.com.  If you happen to find errors, then you can respond to the credit bureau as they have 45 days to investigate the claim once found.  You will also want to contact the creditor who reported the error.

For more information about financing or San Clemente real estate, please feel free to contact us as we will be happy to provide you a free consultation.

This entry was posted on Friday, August 29th, 2008 at 3:41 pm and is filed under Buyer & Seller Tips, Financing 101. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.