Your Credit, Your Home, and Your Future

Your Credit, Your Home, and Your Future

A Guide to Better Credit, Money Management, and Responsible Homeownership

Your Credit, Your Home, and Your Future

Contents

Your Credit, Your Home, and Your Future ........................................................1 1) Your Credit and Why It Is Important ..............................................................3 2) Managing Your Money ........................................................................................6 3) Goal Setting ..........................................................................................................16 4) Banking Services: An Important Step ..........................................................18 5) Establishing and Maintaining Good Credit ................................................27 6) Understanding Credit Scoring ........................................................................36 7) Thinking Like a Lender ....................................................................................39 8) Avoiding Credit Traps ......................................................................................43 9) Restoring Your Credit ......................................................................................50 10) Planning for Your Future ..............................................................................53 11) Becoming a Homeowner ..............................................................................54 12) Preserving Homeownership: Protecting Your Home Investment ....65 13) Glossary of Terms ............................................................................................73

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Your Credit, Your Home,

and Your Future

An Abridged Version of CreditSmart?, a Guide to Better Credit, Money Management, and Responsible Homeownership

If you're like many individuals, you don't fully appreciate how essential good credit and money management are until you need them.

Perhaps you've been renting an apartment for several years, but now you'd like to buy a house. Maybe it's just not worth fixing your 10-year-old car, but you need a way to get to work so you need a car loan--fast! Or suppose your house has a damaged roof and the cost of repairs exceeds your savings. To resolve emergency situations like these while continuing to manage your existing financial obligations, you'll need good credit and good money management skills.

Good credit is the result of careful planning of your finances. Your credit record affects everything from renting an apartment to buying a home. Without good credit, it's difficult to save money, become a homeowner, and build financial security.

That's why this guide is so essential; and that's why Freddie Mac, a company dedicated to opening doors to homeownership for millions of families across the United States, is bringing you this guide. Freddie Mac recognizes how important it is for consumers to have the information and the tools that will help them achieve their financial goals and dreams, including the dream of homeownership.

It is our sincere hope that the valuable information contained within will empower you to take immediate control of your financial future. Remember, the decisions you make today will impact your financial future tomorrow and for years to come. Use this guide to take that next step to achieve your goals and build financial security.

Stay on Course

Good Credit Helps You Achieve Your Short- and Long-Term Goals

Short-Term Goals

Renting a place to live. Opening a checking account

at a financial institution. Getting a new job (which

may require a credit check). Establishing utility services

in your name (e.g.: electricity, heating, water, telephone, etc.). Making a major purchase, such as a car or furniture. Keeping your other rates low (such as auto and homeowner's insurance).

Long-Term Goals

Renting a better dwelling than the current one.

Going back to school or college.

Saving more money. Buying a car. Buying a home of your own. Starting a business. Investing for your future.

Your Credit, Your Home, and Your Future

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