"The Importance of Having Good Credit"

"The Importance of Having Good Credit"
By Andre Plessis

YOU can EASILY be wealthy in real estate if you follow the 3 simple rules. The first rule is to have excellent credit. The examples bellow will show you how important it is to have an excellent credit.

Credit scores ranging between 300-850, only about 1% of the population has earned the best possible credit score through years of responsible financial management and credit use. To aim for the perfect credit score you should have a clean record of on-time payments at least 7 years. You should also have a robust credit history with 3 to6 credit cards and 1 to 2 loan accounts that have been opened for a very long time. You should use at least one of these accounts regularly each month, make sure to not have balances that exceed 35% of your credit limits. Example: If you have credit limit of $10,000 you should try to maintain a maximum balance of $3,333 on that credit card. Last, you should try to limit the number of inquires and negative records such as bankruptcies, debt settlements, foreclosure, collections and tax liens. Together, all these credit improvement tips can help you achieve a perfect credit score, which is what you want to aim for.

You MUST HAVE a plan to improve your score if not, it can be costing you THOUSANDS, TENS OF THOUSANDS AND EVEN HUNDREDS OF THOUSANDS OF DOLLARS.

When it comes to credit cards, auto loans and home loans, the higher your score, the lower the interest rate you will be paying to creditors.

Here is a Breakdown of How Scores Are Distributed Across The U.S Population:

The table bellow shows you two examples with loans of $200,000 and $300,000. Each time you can see the monthly payments and interest accumulated over the life of the loan using interest rates of 6%, 7%, 8% and 9%.

The upper part of the table shows the example of someone who gets a 6% interest rate on a $200,000 loan. His payment is $1,199,10 per month. That same person will save $47,341,42 over someone who has a 7% interest rate and pays $1,330,60 per month. That same person will save $147,651,90 over someone who has a 9% interest rate and pays $1,609,25 per month.

The bottom part of the table shows the example of someone who gets a 6% interest on a $300,000 loan. His payment is $1,798.65 per month. That same person will save $71,012,12 over someone who has a 7% interest rate and pay $1,995.91 per month. That same person will save $221,477,86 over someone who has a 9% interest rate and pays $$2,413.87 per month

Life will be much harsher for those who do not make an effort to improve and maintain an excellent credit.

While the savings are most striking when it comes to home loans, the effects of lower credit scores are not limited to your purchase of a home. If you want to refinance and pull out some cash to invest in another home, in a business, stock or pay off credit card bills, your credit score can not only determine your interest rate, but it can also dictate how much of your equity you can cash out. The higher your credit score, the higher the amount you will be able to pull out. Someone with excellent credit may be able to pull out all his equity, while someone with bad credit may only be able to pull out a fraction of the equity in his home.

If your credit score ranges between 400 and 500 you will need to have at least 30% to 35% equity in your home to be able to refinance your home. If you don't, no lenders will take the risk to refinance your home. If you are in financial trouble and you can't pay your mortgage, you may very well lose your home as well as ALL the equity you built over the years unless you act quickly and sell your home before your home is foreclosed by the lender.

Conclusion:

Everyone should work very hard to maintain a strong credit rating. As you can see on the examples above if you work hard and maintain an excellent credit the rewards will be tremendous and beyond your imagination.

It is now time to go to step #2 to learn how to easily become wealthy in real estate.

Andre Plessis

Andre Plessis
"The Mortgage Guru"
"A Mortgage Professional whose primary goal is to provide the expertise, guidance and skills necessary to obtain the best mortgage to meet your personal needs".
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P.S. If you are at all intimidated or unsure about the mortgage process if you don’t understand how to evaluate your options in getting a mortgage loan our 15 key questions will help you feel comfortable that you are making the best decisions. Also if you are in the process of refinancing your home with anyone, CALL ME and I will let you know if you are being offered the best loan option based on market conditions and your financial situation.

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