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Protect Your Credit So You'll Qualify for a Mortgage Loan

[Aug 29, 2009.]

 

It's important for individuals to monitor their credit. Mortgage lenders, credit card firms, and banks are among the companies that routinely request credit reports from consumers who seek to do business with them. Here are some tips to help people establish and protect their credit.

What Credit Reports Reveal about Potential Borrowers

Some people wonder why credit reports matter so much. They are important because they give a history of a person's spending habits, open credit lines, balances owed on credit cards and loans, late payments, bankruptcies, foreclosures, alimony payments, etc. The information contained in a credit report shows mortgage lenders and other companies how risky potential borrowers may be.

Building a Credit History

Anytime a person opens a credit card account, bank account, or takes out a car loan, he is establishing a credit history. The longer he has these type of accounts, the more lengthy his credit file. Many young people who are just starting out in the workforce ask parents or other relatives to cosign for loans to help them establish a credit history.

Having a good credit history translates into a higher credit score. A higher score results in more favorable interest rates when it's time to apply for a mortgage, private student loan, or auto financing. A person who has bad credit may be denied loans, employment at certain companies, or even an apartment he is trying to rent. During the current recession many people are having a tough time getting approved for mortgage refinancing, home equity loans, and other credit, so high scores matter more than ever.

Guarding Credit Is Important

Who hasn't heard about some of the security breaches that have occurred in various places that have resulted in the theft of credit card numbers, money from bank accounts, and other financial crimes. Keeping personal information such as account numbers, PIN codes, and checks safe helps guard against identity theft. Personal information should never be given to strangers or unsolicited callers. Being the target of identity theft and having personal account information stolen can result in serious financial problems that can have repercussions for a very long time.

Get Ready to Apply for a Mortgage

Anyone planning to apply for mortgage refinancing or take out a new mortgage needs to get copies of his or her credit report first. People can get a free copy of their report each year at annualcreditreport.com. A potential borrower who reviews her credit reports is in a better position to clean up credit by paying down debt, paying bills on time, and doing other things that will make lenders view her more favorably when applying for a mortgage.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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