6 Credit Repair Tips For Homebuyers
Buying a home is one of the most important investments you'll ever make. But if you have bad credit, it can be even more challenging. Improving your credit score doesn't have to be complicated or time-consuming, but it takes some effort to get started. Here are six simple tips to help any homeowner improve their credit score and become more eligible for home financing.
6 Credit Repair Tips
Review Your Credit Report
Checking your credit reports and scores is an essential first step in repairing bad credit. You need to know what's on your report and how it's affecting your score so that you can work on improving it.
Most people know that they have three credit reports—one for each major bureau—but may not realize that they also have a credit score for each bureau. These scores are created using the information in the report, but there are slight differences between them:
TransUnion's VantageScore ranges from 300 to 850; Equifax's FICO Score ranges from 280 to 850, and Experian's Beacon 5-Bureau Score ranges from 330–830. Differences come down to how much weight is given to certain types of accounts (mortgages vs. auto loans) or specific account characteristics (the number of recent inquiries).
Dispute Any Mistakes
A critical step in your credit repair journey is to dispute any mistakes on your credit report. The Fair Credit Reporting Act requires the three major credit bureaus—Equifax, Experian, and TransUnion—to investigate errors on a consumer's report.
If you're right, they must correct the error.
Pay Off Debt
Another powerful way to help your credit score is to reduce the amount of debt you owe. The more money you owe, the less likely you are to be able to pay it off.
If you have multiple types of debt, pay them off in order from the smallest balance first or the highest interest, whichever is more motivating to you. If possible, consider paying off one type of debt completely before moving on to another type of debt.
Consolidate Debts
A personal loan or balance transfer can consolidate all of your outstanding debts into a single monthly payment. This may help improve your credit utilization rates and avoid missed payments. If you have multiple lines of credit that you have trouble keeping up with, a debt consolidation loan can be a great option for you.
Don't Close Old Credit Card Accounts
Be wary about closing good accounts if there are no other derogatory marks on them; doing so could actually harm rather than improve your credit score.
Closing credit lines will lower your available credit and increase your revolving utilization percentage. Instead, charge a small item every once in a while and pay off the bill immediately.
Make Sure Your Bills Are Paid On Time
Paying your bills on time is one of the most important things you can do to keep your credit score high. You'll avoid late payments by paying on time, which can negatively impact your credit score. It can also help you avoid paying late fees and racking up interest charges.
Beware Of Fraudulent Companies Offering To Fix Your Credit Report
Beware of companies that charge a fee to repair your credit. These services will not be able to help you because they're not regulated by the Consumer Financial Protection Bureau (CFPB). The CFPB is the federal agency that oversees financial products and services and protects consumers.
The Federal Trade Commission also warns against these kinds of scams, so if you see an advertisement online for "credit repair" services that claim they can fix your report for a fee, don't trust it. The FTC also recommends reaching out directly to lenders who have affected your score when looking for help with fixing errors in their reports—you may even be able to negotiate with them if you feel like there's been an error made on their part as well.
Bottom Line
If you're looking to buy a home, you want to ensure your credit is in good shape. In fact, a good credit score can mean the difference between getting approved for a mortgage and being rejected.
Learn how to apply for a loan or refinance your current one with Military Homespot Lending. Click here for the details.