Check Your Credit
Don’t let your credit keep you from becoming a homeowner. I have noticed that those with poor credit just need the tools and guidance to help them breach the gap. I will provide as much information as possible here. Sometimes you need a reputable credit repair company to help, but you might be able to get your credit in check all by yourself and save money that you can later use towards the purchase of your home.
To qualify for a home, you’ll need good credit and a history of paying your bills on time. Check your credit now, you can get a FREE copy of your credit report once per year from each of the major credit bureaus: Equifax, Experian, and TransUnion from AnnualCreditReport.com. Today check your credit with all three agencies, then set up a reminder so you can check it with each one quarterly.
Make it a habit to check your credit score. You can use free services like Credit Karma or Credit Sesame. The credit score they give you is not the same you will have from a mortgage company, but it is a good place to start. Be patient, your credit will improve gradually over time.
Understand Your Credit
A credit score predicts how likely you are to pay back a loan on time, using your past to predict your future. The number ranges between 300-850 and it depicts your creditworthiness. The higher the number, the better a borrower looks to potential lenders.
- Excellent: 800 – 850
- Very Good: 740 -799
- Good: 670 -739
- Fair: 580 – 669
- Poor: Under 579
FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). A credit score below good indicates poor credit history that needs work. Many companies use your credit to decide whether to do business with you or even give you employment. On a home purchase, your credit determines the time a loan you qualify for and the interest rate you will pay.
How to Improve Your Credit
- Remove inaccurate or unverifiable information (file a credit report dispute)
- Pay your bills ON TIME (Need six months of these to see a noticeable difference in your score)
- Making your monthly payment in two installments (every 15 days) instead of once a month, helps you pay less interest and improves your credit score.
- Don’t close a credit account (If you are not using a certain credit card, it is best to stop using it instead of closing the account)
- Increase your credit (If your credit utilization is higher than 30%, call your credit card company and request an increase—don’t use it)
- Do nothing (most negative information drops after seven years, with some exceptions).
- Hire a reputable credit repair company
The Fastest Way
- If your parents, significant other, or a good friend have a credit card with a low balance, long history, and never late. Put your price aside and ask any one of them to add you as an authorized user (they don’t have to give you a credit card). This account will then show in your credit history positively, affecting your payment history, amounts owed, and length of credit history. I have seen this increase credit scores over 40 points.
Your credit score can hurt you into paying more or simply missing out. It can honestly cost or save you a lot of money in your lifetime. An excellent score is an incentive that can land you lower interest rates, meaning you will pay less for any line of credit you take out—saving you money.