Repaying loans improves buyer's credit score

Real Estate Watch

May 09, 1999

Paying credit cards on time is one tip offered to help improve credit scores before buying a home, according to an article in the latest issue of Realtor Magazine, the publication of the National Association of Realtors.

The article, entitled "Help Buyers Understand," said factors that can affect credit scoring -- a statistical way of determining the likelihood that a borrower will repay a loan -- includes records of repaying loans, public records such as tax liens and bankruptcies, and how often loans are applied for and how much is actually owed.

Credit scoring uses reports from any of the three credit repositories -- Equifax, Experian and Trans Union -- and grades them on a 900-point scale.

Fannie Mae, a quasi-governmental organization that supplies mortgage money to lenders, says that borrowers with scores of less than 620 are more likely to default and, therefore, might be offered only higher-rate loans.

The article also said applicants can improve credit scores by not using credit to buy furniture or appliances before the mortgage is approved, and by not applying for new credit cards.

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