May 25, 2012

Importance of FICO Score in Today's Market

Are you trying to get qualified for a mortgage?  Well today your FICO Score is more important than ever, for multiple reasons.  One of the biggest reasons is qualifying for a mortgage.  There are a variety of other reasons, some may be buying a new car, signing up for your cellular phone contract, applying for a new job, turning on utilities, and applying for low rate credit cards.

Mortgage Qualification – In the last 5 years mortgage companies have buckled down on guidelines to qualify for a mortgage.  There is no more Stated income, or NINA   (no income no assets) loans out there, especially that allow a low credit score of 620.  No more subprime loans allowing financing 95% of the value and the days of 115% loans are gone.  If your credit is low, you will have to dig deep in your pockets and dish out a large down payment and will not be offered the low rates advertised on television.  Not to mention the extra closing costs (also known as points) they will charge you for having a lower score.

Applying for a New Job – Employers are checking credit scores of their potential employees.  You may ask why are they doing this?  With the unemployment rates up and less jobs out there, employers are seeing multiple applications for just one position.  So how do they try and find the right candidate?  Well a credit app has become part of the norm for most big corporations.  With the economy looking down, many creditors will come to your employer and take their share directly out of your paycheck.  Making it a sticky situation for the employer and this is something they do not want to get involved in. This also may help them determine if a candidate will be responsible, accountable and honest on the job.

Phone Contracts –  Now a days you need good credit to get a monthly contract for cell phones,  if not you will have to probably take the less desirable option of getting a pay as you go contract which can be costly and time consuming.    If you do qualify there may be extra fees and higher monthly rates.

Utilities – Every utility company is different, but many check credit as well now.  They want to ensure that you will be paying your bill each month.  Some are also now reporting to the credit bureaus, giving you more incentive to make your payments and in a timely manner so it will not impact your score negatively.   If you do have bad credit alot are requiring a deposit which can be upwards of $250.00 just to turn on your utilities.

Credit Cards – Missing credit cards payments can mean increase interest which equals higher payments and possible lowered credit limits.

So what does this all mean?  FICO Score affects all financial aspects of your life.  Make your payments on time and do not let things go to collection.  Bankruptcy and foreclosures are huge negatives on your credit score.  Try and keep balances low, do not max out credit cards and try to have at least 3 credit lines open and active to keep that credit up to date.  Just because you don’t have anything negative doesn’t mean you will have good credit, you will have no credit, which can be looked upon as negative because creditors cannot see that you have a history of making timely payments.

So if you are looking to get that dream home but not break the wallet,  keep that credit score as high as possible, to put yourself in the position of getting the lowest costs and rates.

Posted in real estate
Share This Post
Please enable Javascript to comment on this blog

Sites We Follow