What is the Best Way to Fix Credit and Apply for a Mortgage?
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Many people do not realize that a credit score is very important when looking to buy a home, in fact, in today’s market it is essential to have a good to excellent score in order to qualify for lower interest rates and simply to get approved for a mortgage altogether. If you have recently decided to check into your credit scores and have noticed that they are not in the best of shape, perhaps you are now searching for ways to improve your scores in a timely manner.
First off, credit fixing is not going to happen overnight and it is important to realize this fact up front so that frustration does not develop when one does not see a significant increase in a score within a few months time. However, there are certain circumstances and actions that can greatly improve a score in a short period of time. For one, check on your credit report for any collections accounts or debts owed that were left unpaid. If you have one or more of these items, consider calling the company and paying off the debt in full. Then dispute the charge on your credit report and they will have it removed completely. This could increase your score dramatically, possibly by a hundred or more points in some circumstances.
Next, pay your bills on time and consider lowering your credit to debt ratio. If your debt is very high, consider requesting credit increases on your credit cards which will ultimately increase your total credit available and cause your credit score to rise.
The best way to fix your credit score before applying for a mortgage is to remember this process takes time. Just as ‘Rome wasn’t built in a day’ the likelihood of fixing your credit today and successfully applying for a mortgage tomorrow is next to impossible. The best rule of thumb according to top financial advisers is this process can take a minimum of six months to a year.
The first step is to order a free credit report from each of the three credit bureaus. In the majority of cases, even a quick overview will show not all of your debts will be appear on all three reports since each entity has different debt listing criteria and there is no way to be sure which report the prospective lender will choose to review.
Meticulously review each credit report to determine if there is room for dispute. If you can furnish proof of entry errors,contact the creditor in writing. Creditors have 30 days in which to validate and respond to a query. Validation and response failure on the part of creditors during this time period allows you the right to request an entry be removed.
Paying off or paying down as many debts as possible improves your credit score and payment history. Your debts-owed should not be greater than 10 to 12% of your income ratio. It ‘s worth the time to use an online calculator for this purpose since most lenders rely upon this figure in their decision-making process.
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LikeDislikeThe best way to fix credit before applying for a mortgage is to pay down outstanding credit, take care of random negative accounts and refrain from applying for credit at other places. The first step to take when one is contemplating applying for a mortgage is to obtain a credit report in order to identify the current credit score and to find out what negative accounts are on the credit report. Secondly, one should pay down outstanding balances on credit cards or other revolving type accounts. There is no need to close the accounts, but simply pay down the balances until they get as close to zero as possible. Lastly, one should refrain from applying for new credit. Many people are tempted to receive discounts for applying for store credit cards, but the decrease in a credit score that this inquiry costs someone is not worth a small store discount. Simply keep in mind that credit scores are vital to the interest rate of a mortgage and one simply needs to prevent the score from declining by merely applying for a credit card that one does not need.
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