Credit is a powerful tool you need on your side when it comes to buying a home. The Lawhead Team would like to share some tips to increasing your credit score so you can qualify to buy a home.

Your credit score will be analyzed by a lender to determine if you qualify for a home mortgage, a car or any other type of loan. Before they lend you money, they want to know how much of a risk you are. The higher your credit score, the less of a risk they feel you will be.

Building your credit takes time and requires an ongoing effort from you. Follow these tips to building your credit:

• Always pay your bills on time. Late payments have a majorly negative impact on your credit score. If you have past due bills, get them current and keep them that way.
• If you know you will have a problem paying a bill on time, call your creditor to work out a payment arrangement so you do not go late on your payments.
• Keep your debts low. High debt to credit limit ratios drive your credit score down. Pay off your debt, don’t just move it around.
• Don’t close unused accounts. A zero balance may help your score.
• Don’t open new accounts you don’t need. This can lower your score.
• If you open new accounts within a short amount of time, this can be a red flag. Avoid opening up new accounts especially if your credit is less than three years.
• Avoid multiple credit inquiries within a short amount of time. If multiple inquiries are necessary – such as if you are shopping for a new car or home loan – have them pull the inquiries as close together as possible.
• Monitor your credit. Checking your own credit down not affect your score plus you will know if anything suspicious or bogus appears on your credit history.
• If you have had credit problems in the past, you may want to open a new account and keep it paid on time and not maxed out.
• If you manage them correctly, a mixture of credit cards and installment loans can help raise your credit score. However, multiple installment loans can lower your score since payments remain the same until balances are paid in full.

Do you have questions about applying for a home loan? Please call The Lawhead Team, “Because two Lawheads are better than one!”

As a guest writer for The Lawhead Team’s blog, I’d like to share my experience in dealing with my condo in North San Diego County and its recent short sale.

I had originally purchased my newly renovated condo in 2005, at a young age of 23.  My oh my was I proud of myself I had made such a big step in purchasing my own home at a young age.  What I didn’t realize was that it was right at the height of the market with my condo listed at a pricey $300,000.  However, I had the means to pay the mortgage, pay the down payment and live “happily ever after”.

It wasn’t always easy, scrounging up the money to pay the mortgage every month, not to mention the high HOA costs and all the other countless expenses that come with owning a home. But I did it and I wasn’t going to let that baby go.  It wasn’t until early last year, around February of 2012, I contemplated moving and needed to figure out what in the world I was going to do with my condo.  In my building of 8 units, I was one of the only two left of the original owners who had bought in 2005.  I contemplated renting out my condo however I would still be stuck with a $500 negative every month.  While my fiance and I were shopping for homes to buy, having an additional negative of $500 did not seem feasible.

On top of the negative, I was saddened to see the value of my home had dropped tremendously.  Of course, every one’s value had dropped but it seemed there was no recovering from this loss…in my lifetime anyway.  The original listing price of my prized possession in 2005, at a whopping $300,000, was now valued below $100,000!  While I wanted to hold on to my baby for as long as I could, maybe because of the pride of ownership, maybe because I’m stubborn, who knows, I knew it was time to let her go.

My previous neighbor had done a short sale on  his condo and was already repairing his credit.  It killed me to do it but in the long run I look back and am thankful I decided to go ahead with a short sale on my condo.  Fortunately my credit score was in the 800’s when I chose to short sale so I am hoping it doesn’t take long to repair my credit. A time span of 2-3 years is the average credit recovery time after a short sale.

The reason for my writing this is to let other homeowners who are upside down on their homes know that there is hope.  Don’t let your home go to foreclosure.  Taking advantage of a short sale is one of the best decisions I made.  Though it was a very bittersweet decision, I do not feel tied down anymore and my husband and I had the opportunity to buy a beautiful home for 2/3 the original cost of my condo.

Please contact The Lawhead Team if you are considering doing a short sale on your home.  They will be a true asset to you and your family.

Written by Vanessa Dakan.