Credit repair can be crucial if you are looking to obtain a mortgage. Negative information and errors on your credit can cause a lot of problems when you are trying to obtain a home loan, possibly keeping you from qualifying at all. Fortunately, you can fix your credit if you are willing to devote some time and effort to the matter. There are things you can do to boost your credit score in as little as one month, although you should consider spending at least six months working to repair your credit before applying for a home loan.
Once you receive your credit report, you must thoroughly examine it for errors and red flags. Almost everyone has some sort of error on their credit report because credit bureaus use information from creditors. Make sure to catch any typos, misspellings, incomplete information, or any inaccurate information. If you find a mistake, no matter how big or small, be sure to dispute them with the credit bureau and provide any supporting documentation you have.
If you have negative information on your credit report, it will stay on your credit record for seven years. Bankruptcy may remain on your credit report for up to ten years. Most lenders will require that you have good recent credit history. The older the problems on your credit, the less it will influence your credit score.
The first step in beginning to improve your credit is to order free copies of your credit report from the three major credit bureaus. Most mortgage lenders use information from TransUnion, Experian, and Equifax to determine your credit status. Each report can be slightly different and lenders will usually use all three reports. You can request reports every 12 months free of charge, or any time you have been denied employment or insurance due to negative information on your credit report.
If you want to take steps to repair your credit, it’s a wise choice to pay off any delinquent accounts you might have like charge-offs and collections. Under the new FICO scoring system, delinquent accounts can be costly. Accounts that have gone to collections will be viewed more harshly than paid collections. You may always attempt to pay off accounts with a creditor in the hopes that they will remove negative information from your credit report.
A borrower with a high level of debt in relation to their income poses a high risk to lenders, and underwriters may deny your application if they aren’t confident in your ability to pay back a loan. To increase your chances of getting approved, try and lower your monthly debt to 10% of your income at the most.
Creditors want to see that you have a pattern of paying your debts. It looks good on your credit report if you have a steady history of on-time payments. Having good credit history can help lenders forget about past late payments.
You should avoid opening any new lines of credit a few months prior to applying for a mortgage or until the loan has closed. Lenders are wary of borrowers who open new credit accounts because it suggests that they may be having financial problems.
This is a method used by mortgage brokers and lenders to help home buyers quickly improve their credit score. Rapid rescoring allows new information to be added to your credit report quickly, usually within a few days. Going through a credit bureau can take weeks.
Gaining a few quick points might just be enough to get you a lower interest rate. When shopping for a mortgage, every point matters and this can help you save money. Think of rapid rescoring as a way to fix errors or add recent information to your credit history as fast as possible.