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Establishing credit: it seems like a daunting task when you're a first home buyer. But it's not rocket science. With a few easy steps you can get your credit history started so you can have a mortgage-ready FICO score. Before we get to the tips, let's look at what a credit score is and why 2012 first time home buyers need to understand credit.
A FICO credit score is important in the home buying process because your score is one way lenders measure the risk in lending you money. The general rule is that the higher your score, the more likely you are to pay the loan back. While low FICO scores aren't always an indicator that you're a riskier borrower, it's simply one way lenders measure the risk. With first time home buyers it's one of the few ways to tell.
Several factors make up your credit score. Length of credit history, diversity of credit lines, on-time payments and debt ratios all factor into your credit score. the question remains, how does a first home buyer begin to establish credit? Watch the video below for a quick tip.
Yuo can also see the video here: 60 Second Mortgage Tip: Establishing Credit
Download "The Essential Guide to Buying Your First Home" at the button below. The free guide walks you through the mortgage process with tips on credit scores, down payments, interest rates and more. Get your copy today.
(credit photo: Flickr user Andres Rueda)
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