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When you’re getting ready to purchase real estate, whether it’s in Anne Arundel County or anywhere else for that matter, you know the importance of having good credit. The better your credit score, the lower your interest rate. The lower the interest rate, the more home you’ll be able to afford.

People with higher credit scores generally pose less of a risk to lenders, reducing the cost of doing business. That enables lenders to offer financing at a lower interest rate. Here’s how credit scores can affect a home buyer:

For a mortgage loan of $125,000:

If you have good credit, you can qualify for a rate of 7% and a monthly principal and interest payment of $831.63.
If you have poor credit, you might qualify for a rate of 12%, and a monthly principal and interest payment of $1285.77.

In this example, the difference between good and bad credit can cost more than $450 per month!

Your credit can also make you more (or less) attractive to sellers when you make an offer to purchase a home. If you have bad credit and have an offer that is competing with one written by someone with good credit, the seller will most likely choose the latter, as they’ll be more confident in the buyer’s ability to get financing.

Here are some tips to help improve your credit score:

• Pay bills on time, and pay at least the minimum amount due.
• Contact your creditors immediately if you miss a payment, so you can work out a payment plan.
• Do not close credit card accounts in good standing, as no history of credit is seen as a risk.
• Avoid charging to the limit of one card. It’s better to charge less on two cards with room to spare.
• Do not open new accounts, because it shows an interest in acquiring new debt.
• Ask creditors to raise your credit limit.
• Correct errors on your credit report.
• Find out the key factors that are dragging down your score, so you can fix them.

To get a free copy of your credit report, visit www.AnnualCreditReport.com.

Melissa DelGaudio specializes in Real Estate in Anne Arundel County and the Chesapeake Bay Region of Maryland.

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