Buying a home is the American dream and you have decided that it is time to start looking into buying a home of your own. That’s great! However, you probably know that there are things you should be doing before you begin your search – but where do you start? The first thing you need to get in order, before you do anything else, is to get a copy of your credit reports. That’s plural – credit reports.
You need to get a copy of your credit reports from all three credit reporting agencies – Trans Union, Equifax and Experian. If you are thinking about buying a house, you may not realize the importance your credit reports hold in getting an approval for your new home.
The mortgage companies are more concerned about your recent buying and repayment history than what may have happened years ago. If you have too many recent late payments or collections, there may not be anything you can do to get approved in the immediate future.
However, there are some things you can do to clean up your report. So in six months to a year or maybe even two years, depending on how bad your credit is and how long it takes you to clean it up, you can apply for a home mortgage and get your approval.
Here are a few things you can do to restore your credit and credit score quickly:
1. Check your credit reports for errors. Again , that is plural so check all three of your credit reports for errors. If there are mistakes on your credit reports, you will need to start an investigation with the company or the source of the derogatory information. Contact them in writing and make sure you include all supporting documentation proving the information is in fact an error.
2. Set up a timely repayment schedule. If you have any accounts that you have been late in paying, you will need to begin paying all of them on time. Paying your bills on time for a minimum of six months will go a long way in improving your credit rating.
3. Collections. Try to avoid having your accounts turned in to collections. A collection is the most damaging of all credit issues. So work out a re-payment plan before your account turns into a collection. A credit improvement agency may be able to help you get your collections erased; but only if the creditor did not abide by all of the laws of the Fair Credit Reporting Act. However, this is generally not the case because most creditors know the laws and how to follow them. So don’t count on this as a quick fix . Most collection accounts will stay on your credit report for a minimum of seven years.
4. Keep a low balance on all of your revolving credit accounts. Try to keep your balances below 50% of your limit. The lesser the balance the better it looks to potential creditors.
5. Do some soul searching. Try to determine what caused your credit status to get out of control in the first place. Then do whatever you have to to amend your bad habits – if any.
6. Get a secured credit card. Secured credit cards can be very helpful in improving your credit. There are many things you can do to get your credit report back on track quickly. So talk to your real estate agent for more information about how you should go about doing this.
In the meantime, your Realtor will be able to get you started on your path to home ownership while you are working out your credit issues. Your agent has the experience and the know how to help you get into your new home as quickly as possible. So take advantage of all they have to offer you.