Credit reports are maintained by three major credit bureaus (Experian, Equifax, and Transunion). They each use varying techniques to generate a numerical credit score that reflects your credit worthiness. The higher the score, the better your credit worthiness. Specific items will have a negative impact on your score and can possibly result in you getting denied for a mortgage. The following are recommendations for NJ home buyers on credit activities that affect home ownership.
Credit Activities That Affect Home Ownership
Delinquencies
Delinquencies reflect poor credit behavior and will therefore reduce your score. The extent you are late (30, 60, or 90+ days) and the number of recurrences also get measured. Delinquencies remain on your credit profile for an extended period of time.
Debts Sent for Collection
If you are behind on payments and a lender has given up on their own attempts to retrieve funds from you, they will likely transfer your account to a collection agency. The collection agency sends information to the credit bureaus. The information will show in your credit report even after you pay off the debt.
Creditor Charge-off
If a credit provider is unsuccessful in collecting the total amount that you owe to them, they may “charge-off” the the leftover amount. This could therefore occur if you completely neglect to pay or if you settle for a lower amount. Charge-offs appear on your credit file for seven years. New creditors will see this history and wonder whether you will continue with this offense.
Publicly Recorded Offenses
Bankruptcy, tax liens, judgments, foreclosures, and other legal matters are entered into public record and to credit bureaus. Regardless of whether you resolve these debts, the initial reporting will appear in your credit report. Particular items appear for seven to ten years while others (such as liens) remain forever. Therefore, it is critical to avoid letting credit issues get this far.
Recommendations For NJ Home Buyers
All of the credit activities that affect home ownership discussed above make you a high-risk borrower and will either lead to higher interest rates or completely stop you from getting loans. Practice conscientious behavior and it will save you time, money, and heartache when it comes to buying a property. Keep in mind that this represents only a few typical credit mistakes. Contact Financial Investments and Trust (FITcredit) for guidance on improving your credit or assistance with existing credit issues.