Buying a Home? A Guide to Getting the Right Score to Qualify

A couple wants to buy a home and begins the paperwork for a mortgage, but is surprised to learn that the bank has turned them down due to having a low credit score.

Sound familiar? For many families in America, that is an all-too common tale, especially in the post-crash years in the real estate market.

The truth is, credit scores are more important than ever before when buying a home. And getting the right score can be a pain – especially if you are fighting an uphill battle, like many Americans. But, there is good news. Getting the right score to qualify is not only possible, but realistic if you take the appropriate steps.

Here is a simple guide to boosting your score so that mortgage loan can become yours.

Checking Your Credit

The first step is to find out what your credit score actually is. Without being aware of your credit score and your record, you’ll have no chance of repairing it – which means your home loan application is marked for failure.

There are three national credit bureaus that work with the federal government to supply you with three free credit reports every year – one from each bureau. They are Equifax, Experian, and TransUnion, and each offers to show you what is showing up on your credit record, the report that lenders review when seeing if you qualify for a loan.

The only way to get a reliable and free credit report is to go to AnnualCreditReport.com and request one. That is the only website that is authorized by the Federal Trade Commission to deliver these reports; any other sources are for-profit entities (or scams).

You can request one report per bureau per year. It always helps to check often, so requesting one report every four months is a good idea.

Cleaning Up/Fixing Your Credit History

When you receive your report, you will be shown:

- Any missing payments to any creditor you’ve had (credit card, utilities, auto, etc.)

- The number of on-time payments

- Any outstanding amounts owed currently

- Any amounts turned over to collection agencies

Start by clearing up any errors that appear on your credit report. These most typically are items that have been paid by you, but are still showing up. You will more than likely have to contact the creditor and request that they fix the mix-up, and may have to show proof of payment.

Also look to see if there are any other collection situations or mix-ups caused by changes of address, name changes, or any other situation – anything that could have resulted in a miscommunication between you and your creditors.

Surprisingly, errors make up a good chunk of what penalizes people on their credit histories – and many are never corrected. Cleaning up your record will be a good start.

Adjusting Your Credit

Contrary to what infomercials may tell you, credit repair is not an easy, one-click fix. It requires months and sometimes years of work to demonstrate diligence, responsibility, and credit trustworthiness. But, it is definitely possible.

If your problem is missing payments on your bills because you forget to make the payments, set up payment alerts on your phone, email, or computer. Request these well in advance so you know that you have something to take care of soon. You can go a step further by signing up for automatic payments to be drafted from a bank account – which ensures your payments are never late (and if they are, it isn’t your fault).

If you frequently run into problems paying for your charges and debts, you’ll have no other option than to restrict your spending. Budget well, consolidate your debt when available, and don’t carry balances on your credit cards if at all possible.

You may have to keep a strict budget for six months to a year before your negative credit score starts to really pick up, but the benefits – including being able to buy a home – are definitely worth it.

By the way, what is considered a “good” credit score? The minimum score for a maximum HUD loan is 580, but you are considered pretty set from a credit score standpoint if your score is 720 or higher. You can still qualify for home loans with credit scores from 600-700, but your chances diminish the lower your score.

Comments

Name (required)

Mail (will not be published) (required)

Website

Sponsored Links:

Related Posts:

• Credit Scores: Is Yours High Enough?
• How to Maximize Home Equity
• Drop in Home Mortgage Rates Expected to Abate Foreclosures
• Cleaning Services for Bank Foreclosed Houses
• Essential Tips for First Time Home Buyers