Ever wonder just how far-reaching your credit score really is? The short answer: very. Your FICO credit score affects nearly all of your financial dealings, from the annual percentage rate that you pay on your credit card to whether you are able to purchase a cell phone.

Your credit score is of particular interest to lending institutions. Nearly 75 percent of all lenders assess your credit score when determining whether to grant a loan. If you plan on ever buying a house and car, or purchasing car or homeowner’s insurance, expect lenders to examine your credit score very carefully. A bad credit score will make most lenders think twice—they don’t want to lend to individuals who appear to be a risky proposition. A bad credit score could keep you from getting that dream house or purchasing a new car, and could even threaten the possibility of getting a job. So what’s the easiest way to ensure that you’ll be approved for a loan? Become familiar with your credit report and score. The more you learn about your credit score, the less likely you’ll be of becoming a risky proposition.

Why all the fuss over a simple three-digit number? Examining how your FICO credit score is calculated may provide insight into why some lenders may choose to deny your loan application. Your FICO score (FICO, by the way, stands for Fair Isaac Company—the institution that created and compiles the score) is calculated using several data pulled from your financial records. These include: the number and types of credit cards you use, your payment history, the amount of money you owe, the number of years you’ve had a history on file, and whether you have any new credit.

Which of these things carries the most weight in determining your credit score? Approximately 35% of your credit score is determined by your payment history. Your payment history refers to a number of factors, including the different types of payments you regularly make (examples of payments include standard major credit cards, department store credit cards, mortgages, and car loans), and whether you have missed or paid late on any payments. Included in your payment history is information regarding any bankruptcies, liens, judgments, foreclosures, wage garnishments, or law suits that have been recorded. If your payment history reflects that you don’t have much debt and usually pay your bills on time, you can expect your credit score to reach into the upper brackets. Conversely, if your payment history reflects a pattern of missed or late payments, and you have a significant amount of outstanding debt, you can expect your credit score to be much lower.

Another large chunk of your credit score is determined by the total amount of debt you carry. This includes all the amounts you owe on different credit card accounts, as well as installment payments such as car or student loans. Also of importance is the different kind of debt you carry, such as credit card debt versus mortgage and car loan payments. If you carry a lot of debt on a high-interest, long-standing credit card account, you can expect this scenario to hurt your credit score significantly. Another scenario, however, could have a much different effect on your credit score. For instance, an individual who pays a lot, mostly due to their mortgage payment, will likely have a higher credit score than a person who pays a lot because of debt on their credit card.

Now that you have a better idea of how your credit score is calculated, you can understand why lending institutions may be wary in lending to individuals or small business with a low credit score. Lenders can interpret a low credit score to mean that you have a high amount of outstanding debt and a history of missing payments (or both). Unfortunately, even if you are approved for a loan, chances are that a low credit score will saddle you with very high interest rates. Before you approach a lender, be certain you know your credit score. This gives you the opportunity to clear up any discrepancies or inaccuracies that may be on your credit report before your score is scrutinized by lenders.

Ecommerce is rapidly expanding to the real estate market.  Sellers are looking to auction off down payments, lease agreements, or selling the home outright. Individual homeowners and real estate agents are turning to the Internet as an avenue for sales.  Buying your home online can be a risky venture.  On the flipside, there are some great deals out there.  If you decide to take this path, you should be aware of the challenges associated with buying a home site unseen.  The more educated you are, the better. 

First of all, the home could have major structural issues not evident in an online picture.  Pictures don’t always tell the whole story.  It has also become much easier to doctor photographs.  You have to consider the possibility that some sellers might not be as truthful as they should be.  After all, they are trying to sell the property, so the sales description is going to emphasize the positives and downplay the negatives.  Getting a fixer upper is one thing.  Living in a house that is structurally unsound is a completely different matter. 

Secondly, you must make sure that you know your property rights.  If you are buying land, you must make sure that you can have the utilities you want.  There might be restrictions that are not specified on the auction site.  There would be nothing worse than buying the property for your dream home and then discovering that you cannot have utilities.

Another potential hazard to buying your home online is not knowing anything about the area.  It would be well worth your time to do some investigating.  Is the property in an area that is prone to flooding?  Is the property accessible by car?  These are things that the seller might not mention in their ad. 

Also, it is easy to become a victim of online fraud.   There is really no way to regulate the online auctions.  The auction companies have their own guidelines in place to circumvent illegal activity, but with the high volumes of online business activity every day, it is hard to police every transaction.  The government may eventually step in and try to pass laws that will protect online consumers.  Time will only tell, so until then you have to keep your guard up.

On the positive side, it is important to note that online auctions are not legally binding.  The companies are not actually licensed to sell real estate; therefore, they are not true auction houses.  The service that they offer is advertising to potential buyers.  It gives buyers and sellers the opportunity to communicate with one another online and work out a legally binding contract after bidding ends.

When placing an ebay bid online, you should be aware that there are two types of bids: “Binding” and “non-binding”.  The term binding is not entirely accurate because it does not result in a legally binding contract. A Binding real estate auction means that you have placed a bid with intent to buy.  If you don’t live up to your end of the transaction, you will receive negative feedback.  It won’t result in legal problems, but it can hurt your business potential on Ebay.  Everyone looks at the feedback and most people won’t do business with someone if they have a lot of negative feedback.  A non-binding bid simply means that you cannot receive negative feedback if you fail to complete the transaction.

Always take the time to review the auction companies’ policies and procedures.  There should be a link to them on the main page.  If you have trouble locating them, contact the company directly.  You should be able to email them any questions that you may have and they should respond to your inquiries quickly.  Try to talk to people that have a lot of experience with doing business online.  It seems like just about everyone has some experience with online auctions.  They may have some horror stories, but don’t let that discourage you.  You can learn a lot from the mistakes of others.  If you prefer reading to chatting, there are also several books about the subject.  Visit the technology section of your favorite bookstore and you are bound to see a possible resource. Take all of the advice and use common sense when entering into an online real estate deal.  You will emerge as the winner and have a fabulous home to show for it.

Someone you know—a friend, perhaps—desperately needs to buy a new car. She asks you to co-sign a loan for her, pledging wholeheartedly to pay it off herself. What do you do? Before you decide to sign on the dotted line, make sure you’re aware of the possible consequences of co-signing a loan.

Why do some people need a co-signer in the first place? In most cases, the lending institution has determined that your friend is not eligible to receive the loan. This could be due to several reasons. Maybe your friend has not established enough credit history to qualify for such a loan. Or, in the worse case scenario, your friend’s credit history has been deemed risky enough to be denied the loan. In any case, the bottom line is that your friend was considered a lending risk, and thus, is not able to get the loan on her own. That’s where you come in.

Before you make a decision, know that the Federal Trade Commission has reported that, in cases where a loan goes into default, as many as three out of four co-signers are ultimately deemed responsible for repayment. These figures were derived from studies conducted among certain kinds of lenders, but you should keep the possibility of repaying the loan in mind if you decide to co-sign.

What other risks may you face if you decide to co-sign? In many states, if the borrower misses a payment, the lender can go straight to you. You may be responsible for late charges and attorney’s fees, and you run the risk of losing any collateral you may have set against the loan. In some cases, your wages could be garnished, or you may even face a lawsuit. Even if you avoid these risks, the loan you co-signed most likely will appear on your credit report as a credit liability. This could eventually lower your credit score, which may hamper your ability to gain access to credit if you plan to make any large purchases during the life of the loan.

If you’re still contemplating whether to co-sign, consider whether you would be able to pay off the loan on your own, in the case that your friend defaults. Even if your friend is reliable and gainfully employed, there is always the distinct possibility that she could somehow become unable to continue making payments. Are you willing and able to continue making payments if that were to happen? If you imagine this type of scenario would cause you great financial burden, perhaps you are not the best candidate to co-sign.

But if you ultimately agree to co-sign on a loan, there are some precautions you can take to make the process as easy and painless as possible. First, read over all documents carefully. Understand what kind of loan you are signing for, and all the terms for the loan. Ask the lender to clarify anything that you don’t understand, or that seems ambiguous. Also, make certain to get copies of all paperwork.

Most importantly, try to establish some specific terms with the individual you are co-signing for and the lender. One important term to establish is that you should only be responsible for the primary balance. This will help you avoid any late charges that may stem from the original balance. Also, in the case that the lending institution decides to sue, you will avoid being responsible for legal fees. Another important term to try to establish is that the lender should notify you in the case of any late payments. This allows you to become aware if any problems should arise, and you will be able to take control of the situation before matters become more complicated.

Even though co-signing for a loan may sound risky, there are certain situations where the practice is wholly reasonable. Parents, for instance, routinely co-sign for their children in order to help them establish credit, and to aid them in making large important purchases.

But what about your friend—do you co-sign, or not? The decision is ultimately yours, though it would be wise to balance the risks carefully. If you decide to co-sign, be prepared to treat the loan as if it were your own.

The real estate bubble is a much discussed phenomenon used to describe a situation in which property values, both or either commercial and residential, expand very rapidly. The result is an over-inflated market that sees buyers purchasing property at prices far above standard value while fearing the market will burst and property values will plummet as fast as they rose. Buying in such a market can be risky for those who cannot afford to lose on their investment.

It’s difficult to say what qualifies as a bona fide real estate bubble and what is just a hot market. There is no quantifiable standard to identify a real estate bubble and so we are left to depend on experts to tell us which areas of the country are experiencing a bubble and which areas are not. However, not even the experts can agree on the difference between a bubble, which is risky and unstable, and a boom, which has less risk of a rapid downturn. Some mortgage companies and other organizations with an interest in the real estate industry study the market and produce reports to help buyers identify potential windfalls and potential pitfalls by naming cities with what they determine is the greatest chance of a bursting bubble.

Homeowners who buy in a real estate bubble situation risk putting themselves in an undesirable financial situation, particularly if they have very low equity in their home. Equity is how much of the home you own, as opposed to the portion owned by the bank or other lending institution. If you have a lot to pay off before the home is truly yours, and the bubble bursts, you can find yourself in a position where you are paying off a significant debt on a property that can no longer fetch the same or higher value you paid for it. Of course, such a loss is only theoretical unless you actually try to sell your home. Property values fluctuate up and down on a regular basis, with both dramatic increases and decreases in value, so if you can stay in the home until the value rises again (even if it doesn’t go all the way back up), you can avoid significant losses when it does come time for you to move. If you are forced to move before the market becomes more favourable, you could find yourself in a negative equity situation, which will affect your ability to buy your next home.

The situation is less serious if you have greater equity in your home, or if you have the financial ability to absorb a loss, in which case a bursting bubble situation is more of an irritant than a financial catastrophe.

If you’re a person of average financial means who wants to buy a property in an area that may be undergoing a real estate bubble phenomenon, do so from an informed position. Be aware of the potential for loss and measure carefully the pros and cons of going ahead with your planned purchase. Do a little homework before you jump into a purchase: follow the local market for a couple months and track fluctuations; take note of any sale trends, and pay attention to what the experts (conflicted as they may be) report about the area in which you are interested. Use all of the information you gather to help you determine whether your potential positives outweigh the potential negatives.

Practising common sense can help you survive a bursting bubble scenario in the best possible shape. For example, it is wise to minimize your overall debt load to help you manage your financial burden if you are forced to move at an inopportune time. Invest your equity and any unexpected financial gains into improving the value of your home rather than in luxury or impulse buys. Most real estate experts agree that you can recoup between 80 and 90 percent of your investment in remodelling a kitchen or bathroom when it comes time to sell your property. Of course, your best protection is to purchase a home with excellent re-sale potential to minimize possible losses if real estate values plummet unexpectedly.

It pays to be prepared if you’re in a competitive market. If you are fortunate enough to be pre-approved for a loan, it can give you an edge over your competitors who may be interested in the same home or flat who perhaps aren’t financially sound. If you do therefore take the large step of being pre-approved, it’s an indication to the home seller that you are, indeed, serious about buying his home.

So, how do you go about being pre-approved for a loan? Begin by doing an honest self-evaluation of your financial situation. Draw up a list of all your assets comprising your cash, bonds, savings, stocks, mutual funds, IRAs, etc. Against that, make another list of all your debts—e.g. your car installments, credit card payments, loans, etc. A difference of the two will tell you how much you have available toward buying a house. But bear in mind that you will have other additional expenses associated with buying a house. This will give you a realistic picture of just how much you can comfortably borrow and how much you will qualify to borrow. Accordingly, you can meet up with home sellers and express your interest in buying their houses.

With this information at your command, you will be in a better position to begin the process of being pre-approved with a lender. Actually, to be pre-qualified for a loan is a simple process that does not necessitate you’re using a particular lender alone. Once this is done, you’re one step closer to meeting up with your home seller.

This is the right time for you to learn the difference between being pre-qualified for a loan and being pre-approved. To be pre-qualified means you call up a lender and give him your details on the phone and create an “in file” credit report based on details given by him. His information is therefore largely unverified and based on this he will give you a pre-qualification verbally or give you a letter to that effect, subject to a variety of conditions. But a pre-approval refers to a formal commitment from a lender once you have filled out an application for a residential mortgage loan and your details have been verified. These details will include a “tri-merge” credit report from the three largest credit reporting agencies—Equifax, Experian and Trans Union Corp. This is a very initial stage, much earlier in the stage of operations than when the home seller emerges.

To be pre-approved gives you an edge when shopping for a home. You learn to identify the price range in which you’re looking to buy a home. This makes it easier for a home seller to accept or reject your offer if you’re bidding over a non pre-approved buyer. You must also familiarize yourself with a comfortable monthly loan installment.

As in any new venture, preparation is a very important step—after all, this is a business scenario involving big money, loans, etc. It is necessary you get pre-approved for a loan before you start pinpointing the house you want. Besides, pre-approval will put you in a better negotiation position with the home seller by allowing you to move in quickly when you find the best house at the right price.

In order to get the best deal at a price that doesn’t hurt you too much, you need to shop around for the best mortgage rate, APR, the best loan and terms that suit your financial situation best before you see a home seller. To get pre-approved, be sure you get a mortgage loan commitment from your loan officer rather than a mere pre-qualification letter. And don’t allow your real estate agent act on your behalf as a mortgage loan officer too as it will put you on shaky ground.

To avoid such a situation, you should get a referral from a friend, neighbor or co-worker. Also, speak to two lenders or loan officers before deciding. Next, take a hard look at the APR rate. Ask the loan officer for referrals. At this stage, being pre-approved is a somewhat distant dream for you—the formalities being so many. And meeting the home seller? Just a little farther off.