If you are planning to purchase a home or refinance your current mortgage build usable, lender-ready credit.
Credit report repair is critical and can make a dramatic difference in the appearance of your reports as well as your credit scores. Discharged accounts should be updated to remove past due balances, collection statuses need to be deleted, and more.
There are a lot of credit repair strategies you can use to shape up your credit for a mortgage application. Unless you have a specific issue on your credit report, like a new bankruptcy, that will keep you from getting mortgage financing, there is no reason that credit report repair cannot shape up your reports and deliver a significant enough improvement in your scores to help you qualify for your loan within six months. It is wise to speak to a lender or mortgage broker in advance. They may have some valuable tips that will help insure that you are mortgage-ready in all areas of your financial life.
There are a few special situations that lenders are sensitive about.
Working with Lender Guidelines
There are a few exceptions that can keep you from qualifying for a mortgage, mostly related to lender guidelines. If you have had a recent bankruptcy you will want to contact a mortgage lender and ask how much time they require to have elapsed after your discharge date. If they will not consider a loan application for two years after your discharge, your credit repair should be long done by then, but that two year rule will become your time horizon.
Collections and Judgments
Open collections and unpaid judgments can be a barrier to mortgage approval as well. Many mortgage lenders will allow open medical collections to remain unpaid, but other types of collections may need to be resolved prior to loan application. As mentioned, you should speak with a mortgage lender about their requirements.
Credit Repair and Loan Preparation
You need to become lender ready. The only real objective of credit repair is to build usable credit. A big part of the process is designed to improve credit scores as they are usually the first thing that a lender looks at when underwriting a loan request. But credit scores are by no means the only focus of credit repair program. Credit scores alone will not always do the trick. Many lenders require that you have a minimum number of open accounts.
Is there anything special I should do to help my scores before applying for a loan?
Be Very Alert
When it comes to getting a loan, timing is very important. There are a variety of things you can do to boost your scores in the months prior. And a few things you should avoid as well.
For the best credit repair results keep your credit activity to a minimum in the months before applying for your new loan. New inquiries have only a small impact on your scores, but they add up.
Understand the basics of credit scoring
You need to know that the two most important factors in your score are:
Whether you pay your bills on time
How much of your available credit you actually use
It's essential that you pay all your bills on time, all the time. Set up automatic payments or reminder systems so that you're never, ever late. All it takes is a single missed payment to trash your credit . You also don't want to max out any of your credit cards, or even get close. Keeping your credit use to less than 30% of your credit limits will help you get the best possible credit score -- and should help keep you from getting over your head in debt, as well.
Finally, you don't need to carry a balance on a credit card to have a good credit score. Paying your bill off in full is the best way to keep your finances in shape and build your credit at the same time.
No New Accounts
If you do open a new account, even a little gas card, it could knock 100 points off your score. This effect may be short lived, but if you are applying for an important loan, timing is everything.
Reduce Revolving Balances
If you have the means to pay down your revolving balances, do it now. Your revolving balances can cause a major swing in your scores. The lower your balances are the higher your scores will be.
Examine your credit reports
Everyone has a credit score calculated at the time your credit report is requested. It's based on over 100 different proprietary variables and algorithms developed by Fair Isaac (FICO). The range is 300 to 850. You can get your credit score from Experian or Equifax. Most lenders consider people above 650 to be prime borrowers, meaning they will most likely be approved at favorable rates. You should get your credit report at least once every year to verify it for accuracy, and make certain your credit score is up to par.
Unfortunately, unless you take action, reporting errors may linger for years. Post-bankruptcy credit repair is not difficult and can have a dramatic and quick impact on your credit scores. It is a mistake to ignore your credit report or the potential of credit repair. If you do the right things your credit scores can be quite good within 6 months of your discharge.
If you want to build useable lender-ready credit, the time to get started is now!