If you are thinking about purchasing a home, it is best to look at your credit report at least SIX months prior to purchasing a home. It is a good idea to give your credit score a check-up and then take positive stps to improve your credit score if you find problems. Make sure you check all three of the national credit reporting agencies: Experian, Trans-Union and EquiFax.
Review your credit carefully for items that may be reported incorrectly. If you believe something is in error, you have the right to contest it. You will need to contact the credit reporting agency and explain why you believe the item is inaccurate. Alternatively, you can engage a credit report repair services firm to fix your credit report.
If there are derogatory items on your credit report that are accurate but which could cause problems in your loan application, you cannot have them removed; however, you can take steps to counteract them. If you have missed payments in the past, take steps now to get your bills current. Even if it means using the funds that you might be planning to use for a down payment. It is extremely important that you get your accounts current and keep them current. There is nothing which can lower your credit score more quickly than late payments. Over time, this can make a significant difference in your scores.
Also keep in mind that removing all of your credit balances is really not the solution. In fact, credit can be your friend when you are looking to purchase a home. Make sure your credit is POSITIVE, not NEGATIVE. Toward that end, avoid closing out your accounts. Instead, make an effort to pay down your balances and keep them paid down below the minimum or completely paid off, but DO NOT CLOSE THE ACCOUNT.
After reviewing your credit report and you see that most, if not all of the credit cards are nearly maxed out, it is time to sit down and plan an agressive strategy for paying some of them down. One of the critical factors that often determine your ability to be approved for a mortgage is your debt to income ration. In addition, high credit card balances can drag down your credit score. Therefore, it is important to look at paying off some of your balances.
By following these steps, you can improve your credit score and improve your chances of being approved for your home loan.
- Credit Repair – Getting More Positive Into Your Credit Report (creditrepair.org)
- 5 Things You Need to Know About Credit Scores (wisebread.com)