There are obstacles that many people face when buying a home, particularly for the first time. Bad credit is a problem that plagues many potential homeowners. Your credit score is a direct factor in the decision of your loan approval or denial. It also determines the interest rates you will pay on a new home.
A potential lender will ask the question “Have you repaid your past debts in a timely manner?” They will obtain a mortgage credit report from a credit bureau and find out your credit history. So, there really is no escape when it comes to your past debt. But there are some things you can to improve your credit score
- Obtain your credit report. You can get your credit report from all major credit agencies, and you should study them closely to make sure that everything is correct. If there are any errors, you can dispute them and get them corrected. This can actually help your score enough for you to qualify for a traditional home loan mortgage.
- Avoid opening up multiple forms of credit. Multiple credit inquiries can actually lower your credit score. They also raise a red flag to many mortgage lenders.
- Make sure that all of your accounts are current. Only paying the minimum amount is better than paying nothing at all. The longer you stay current, the better your score. Six months of paying on time could greatly improve your overall credit score.
- Pay down your credit card debt. Pay your accounts down so that no account s great than half of the credit limit for that account. Put extra cash towards judgments and garnishments if necessary. Consider calling the creditors you owe and attempt to negotiate new payment options.
- Don’t close old accounts. The longer you have accounts open, the better your credit score. This is true even if the balance is currently zero.
- Use credit responsibly. This is the best way to maintain a good credit score. Avoid getting loans and credit cards you do not need.
It is extremely important to act fast to ensure that your past financial worries do not affect your dream of owning a home. While you won’t be able to repair your credit overnight or a week, you can greatly improve your credit score if you begin at least six months ahead of time.
Once your credit is repaired, you can search for the best home for your budget. Be sure to obtain a free home valuation report from Neighborhood IQ to find out how much a home is worth before you purchase.
Also keep in mind that Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm as well as match you with potential lenders who have products that may help you and provide you with a sense of stability.