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5 Do’s and Don’ts of Buying a Home – Credit Law Center

Buying a home can be one of the biggest decisions you will ever make. Once you have decided to take the plunge and buy a home, there are some things you may want to avoid during the process.

We have created a list of the 5 Do’s and Don’t of buying a home.

5 Do’s of Buying a Home

1. Review and Monitor your credit report: Credit Reports contain errors, approximately 79% of all credit reports contain errors. To get the best interest rates you will need the highest credit score. Make sure you review your report and determine if all information is reporting accurate, timely and verifiable.

2. Manage your debt: Your revolving debt ratio makes up 30% of your credit score. Keeping your debt ratio as close to 1% will have the best positive impact on your credit score. Debt ratios about 50% will have a negative impact on your score, while anything under 30% will increase the positive impact.

3. Identify any negative items: Attempting to correct inaccurate information on your credit report during the home buying process may affect your credit scores and put an account in dispute.

4. Understand your credit scores: Over 90% of lenders nationwide use the FICO scoring model. Currently, FICO does not allow credit monitoring sites to use their scores. The scores you see online may be dramatically different than the ones your lender will use.

5. Seek Professional Help: If there are issues that arise in your credit before you can purchase a home, reach out to a professional.



5 Don’ts of Buying a Home

1. Don’t add any new debt: Buying a new home can be exciting. You can’t wait to decorate your home and furnish it, however, don’t let that tempt you in to opening a new credit card. Adding new credit and more debt can significantly impact your FICO scores. Try and refrain from using credit cards until after the loan is funded.

2. Don’t pay off old collections: Old collections may harm your credit scores if you pay them off. Paying off debts can affect the date of last activity on the account, and this could damage your credit scores.

3. Don’t shop around too much: It is true that you can pull your credit within 30 days, and it only counts as one credit pull, BUT inquiries over 30 days old may have an adverse effect on your credit score.

4. Don’t pay off your credit cards: A zero balance on your credit cards shows up in the FICO scoring model as “no data” which can lower your credit score. Keeping a balance of 1% of the available balance is the key number.

5. Don’t MISS ANY PAYMENTS: This is the most important thing to remember! Payment history accounts for the largest portion(35%) of what makes up your credit scores. A 30-day late payment can lower a score by 100 points and potentially cause you to lose the loan.

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