CREDIT FREEZE—Learn whether you should  get a credit freeze or credit monitoring service?

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If you are considering purchasing a home or refinancing—you can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your area—to determine what loan will best suit you—and your family.  You can compare closing costs, APR's and Par rates to determine what loan will best serve your—and your family's long-term interests.

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The decision on whether or not you should get a credit freeze, credit monitoring or other identity protection measures should be based on a number of factors.

Mandatory Credit Resources...

The benefits of a credit freeze are that the cost is relatively inexpensive, you can lock and unlock your credit at the time of your choosing with a private security code—which puts you in control, you will have relative certainty that new credit cannot be obtained using your credit profile that is with the three major credit bureaus and that should give you some “peace of mind.”

The disadvantages are that if you apply for new credit frequently—say you are a real estate investor—the process can become quite cumbersome. Freezing and then unfreezing your credit on a constant basis with three credit bureaus can lead to a certain level of frustration.

If you do not plan on seeking new credit on a regular basis—a credit freeze may be ideal for you.

The low cost ($5 to $15 per credit bureau to freeze and a similar low fee to unfreeze) along with your infrequent unfreezing will normally lead to satisfaction for you if you decide to go the credit freeze route.

Keep in mind your bank accounts will not be protected by utilizing a credit freeze!

However, if you have a high net worth and high income and are in a strong financial position other more costly measures such as credit monitoring and other identity protection measures on a monthly basis may be appropriate.

For most people a credit freeze should be sufficient protection.  Look deeply at your individual financial situation to see if additional measures are needed.

Other measures you can take to improve and maintain your credit

Once you have a handle on your credit and credit scores it may be wise to use a staggered approach to managing your credit (you request one of your free credit reports from each credit bureau every 4 months) from Equifax, Experian & TransUnion.

In addition you can use the staggered approach to get your free credit report with quizzle and credit.com on a semi-annual basis.

Likewise, you can do the same with your credit scores from Quizzle, Credit Karma and MyFico.

The credit freeze in conjunction with the staggered approach listed above done on a yearly basis should put you in positive control of your credit for years to come. Remember, it is imperative that you do your best to develop a habit of paying off your credit balance on a monthly basis.

Failure to develop the habit of paying off your credit balance from your revolving debt on a monthly basis can easily lead to your credit card usage and outstanding balance spiraling to an insurmountable level. Do your best to cultivate the habit of paying your credit card balance off on a monthly basis.

If you are now, not in position to do so—be sure to make that one of your major goals as soon as you are in financial position to do so.

Equifax also offers a credit monitoring service and you can review what they have to offer by going to www.econsumer.equifax.com.  If you own a small business you can go to www.equifax.com—to review there offerings.

General Guideline of How Lenders Rate Credit Scores

Lenders generally rate credit scores from the least credit worthy (E) to the best credit worthy (A). To see where you fall visit the credit report and credit score page and get your score and then come back to this page.

740 or higher A

640-739 A-

620-639 B

599-619 C

520-589 D

510-519 D-

500 or less E

(A)—Take your choice of loans at the lowest cost.

(A-)—You qualify for conforming conventional loans. You'll pay more for risk based loans.

(B) You may take an FHA/VA loan or even a low down payment loan with desktop underwriting. FHA and VA downpayment and underwriting requirements are somewhat more stringent now.

After Bankruptcy Discharge (Chapter 13) you can apply for a loan if your middle score is 640 or more. Judgments must be paid. Judgments not paid will stop the progress of your score going up.

After Chapter 7 Bankruptcy where a foreclosure was involved the time period before you could purchase a home again with traditional lenders vary from approximately 3 to 5 years.

After 2 years it would be wise for you to check with several lenders to see what there time frame is if you plan on purchasing another home in the future using traditional lenders.

In the past I have worked with home buyers who have purchased a home 4 years after filing bankruptcy and approximately 4 years from the date of the foreclosure.

(C)—You can qualify for a sub-prime loan, but your interest rate will be significantly higher. Expect a pre-payment penalty.

(D)—Most lenders will deny your loan but there are a few "hard money" sub-prime lenders who will approve a loan if you have sufficient downpayment. Mortgage Brokers have access to these wholesale lenders.

(D-)—Only the rare sub-prime lender will approve a loan for someone with a score below 520, and a large down payment will be required—usually 25 to 50 percent. Other conditions will apply as well.

(E)—It is wise to not even attempt to get a loan at this time. If your credit is at a "C" or below it may be a better option to work on improving your credit and purchasing at a later date or pursuing other options.

Also, if you are currently in the process of buying a home be sure not to apply or open new credit "prior to" closing on your home.

Applying for new credit or utilizing your current credit—"prior to" closing could possibly lead to the denial or complication of your loan—which could delay or even prevent closing from occurring.

After one year of home payments your loan will be considered "seasoned" and you will begin to receive many offers for credit if you have not received many within the first year of homeownership.

You must recognize your financial condition and know deep inside whether you can use credit wisely, save wisely and spend wisely.

That is a good first step—the real key, however is that once you know your level of financial discipline—you do practical things that can improve your financial management skills in a meaningful way which should lead to better money management habits and improved living conditions for you and your family.

An easy strategy to build your credit rather quickly is to get a number of cards, say 3 or 4 and use sparingly and pay off your balance in full monthly.

Doing that in conjunction with your new home purchase should lead to the rise in your credit score in the next 24 months—in many cases substantially.

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