Mortgage interest rates continue at record lows, but if you’re hoping to snag a home equity loan for a planned renovation, you’ll soon discover that banks consider a different number to be more important: your credit score.
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Recently, a Federal Reserve official said that most housing-related loans are going to borrowers with a credit score of at least 620. If you’ve ever applied for a Federal Housing Authority (FHA) loan, this probably comes as no surprise, since the FHA requires a sterling credit history even of loan applicants who can offer a substantial down payment.
Home equity line hopefuls are wise to avoid a pointless hassle (not to mention the shock of disappointment) by reviewing their credit in advance of applying.
By law, you are entitled to one free credit report per year. While a credit report includes your aggregate score, it also includes your recent payment history. Here, you may detect black marks that are worth going out of your way to dispute.
Paid credit monitoring services abound. Bypass the shady outfits and instead, opt to deal directly with the major credit reporting agencies: Experian, TransUnion, and Equifax. The higher the score the better.
What if you’ve had credit problems in the recent past? Before using up your one free annual credit score request, gain insight into what you might find with Bankrate’s score estimator. Flag any likely glitches, then assemble the paperwork necessary to either correct or provide context for the issue.
Solving credit headaches can take months. Start now to win the lowest home equity rate for a late summer or fall project.