What You Need to Know Now About Your Credit Score

As a real estate investor, you’re going to rely upon a variety of funding solutions in order to reap the financial rewards available in today’s real estate market.  While you don’t necessarily have an absolute need for credit in order to get started, there’s no question that you can reach your destination much more quickly if you have good credit.  Increasing your overall financial literacy involves learning some crucial details about your credit score – and how it will impact your ability to secure the cash you need for funding your deals.

Your credit score is nothing more than a numeric indicator of your ability to pay your credit obligations in a timely fashion.  The higher that number is, the better of you’ll be when you need to utilize credit for any purpose.  The credit reporting agencies have spent millions of dollars analyzing credit data on tens of millions of consumers, and they have developed highly complex systems for grading risk.  The result of all of this work is the credit score.

You may not be aware of this, but your credit score is a snapshot in time, because your actual credit score fluctuates on an almost daily basis.  With each credit transaction you conduct, you’ll either be positively or negatively impacting your credit score.  Did you make your mortgage payment on-time?  If so, pat yourself on the back.  You’ve just given your credit score a slight boost.

At the same time, paying credit obligations late or having unpaid bills show up on your credit report has a negative effect on your credit score, which will affect your ability to secure favorable terms on credit cards, auto loans, and – mortgages.

Almost every lender uses the credit score as a baseline in deciding whether your application meets their criteria for making a loan.  So if your credit score is 679 and the lender requires a minimum score of 680 in order to be considered for the loan, your application will almost certainly be rejected.

That isn’t necessarily the final word on the subject, because many lenders will manually underwrite loans.  When this happens, they’ll look at many factors other than just your credit score when making a lending decision.  Even if they don’t, there are steps you can take to improve your credit score and increase the odds that your loan might be approved, even if it is at a slightly higher interest rate or with less favorable terms than you were hoping to receive.

In addition, if your current credit score isn’t everything you want or need it to be, there are a number of steps you can take to improve your score.  First, get a copy of your credit report – from the three major credit bureaus.  By going to www.annualcreditreport.com you can obtain a copy of all three of your reports, once a year for FREE.  Because the information contained in your credit report is the basis by which your credit score is derived, it makes sense that you would want to know exactly what information is in it.

When you have these reports in front of you, read through them to ensure that the stories these reports tell accurately reflect your credit history.  If they don’t, you can correct this information so that potential lenders have the most up-to-date information about your ability to repay a loan.  While there are a variety of hoops to jump through, it’s worth the effort, because your credit score will increase, which will enable you to more easily get the loan approvals you need in order to grow your real estate investing business.

There is much more to getting the loan approvals you need for your real estate investing activities than can be easily discussed in a brief article.  This gives you a better idea of what your credit score is good for, and why it is so critical that you maintain a high credit score.

Tap into the opportunities available in today’s real estate market by increasing your financial literacy and by doing everything in your power to improve your credit score.  It might seem like a lot of work, but it will easily seem worth the effort when you receive the rate and terms you need to turn a potential property investment into a winning real estate transaction that adds multiple zeroes to your net worth!