How to Fix Your Credit Before Buying a Home

Table of Contents Show

You probably have an idea of what you want in your dream home. Unfortunately, it’s not always easy to get.

Unless you have at least six-digit savings lying in your bank account, you’ll need to apply for a mortgage to buy a home.

image - How to Fix Your Credit Before Buying a Home — How to Fix Your Credit Before Buying a Home

And trying to get a mortgage can open your credit to all kinds of scrutiny from lenders. Worse, if you have bad credit, not only will it make your home-buying process complicated, but it can bring it to a screeching halt.

That said, if you don’t have good credit, you’re probably looking for ways to boost it up before you buy a house. This article will discuss that further.

1. Get Help from a Credit Repair Service

If you want to reduce at least the burden of fixing your credit score, it would be best to hire a credit repair service like Credit Glory to do the work for you.

Such companies can help you address negative items and errors on your credit reports by disputing expired or inaccurate information.

In general, major credit reporting agencies and collection agencies like Covington Credit can all make mistakes and claim a consumer is responsible for debts that may not be accurate, thus hurting your credit score.

You can have a more accurate credit report without outdated information or errors with a credit repair service.

Some agencies also offer credit counseling. They analyze your finances and help you find realistic solutions for your credit issues and debt. Moreover, they may contact your creditors and negotiate your debt and payment amounts on your behalf.

If you decide to work with a credit repair or counseling service, always be picky with your selection.

Some agencies may charge excessive fees, so make sure you ask about their pricing structures and any costs you may incur. You don’t want to add another expense that can impact your overall financials.

Read Also:
Improve Your Chances of Getting a Home Loan Based on Your Credit Score
Why You Should Consider Hiring a Mortgage Broker
How to get a Home Improvement Loan?

2. Improve Payment History

Did you know that payment history makes up the largest percentage of your credit score at 35%

Thus, paying your debts and bills on time is the best thing you can do to fix your credit before purchasing a house.

Consider setting alerts for your payment due dates. Also, always review your payments weekly to ensure that you’re not paying anything late.

Late payments can cause all kinds of problems that hurt your credit score, including bankruptcy, repossessions, collection accounts, or foreclosure.

While you can’t erase your past late payments from your reports, making timely payments now can hide your previous payments so that they won’t appear on your reports again.

3. Manage and Pay Your Debt

Next to payment history, your credit card debt takes the second largest chunk on your credit score at 30%.

The fastest and easiest way to fix this is to promptly pay your credit card debts. An even better approach is to pay off these debts as soon as they’re charged.

By having no outstanding balanced on your credit cards, you can improve your credit score by at least 30% in just a few months.

4. Don’t Open New Accounts

It would be best to keep your existing account rather than open a new one before you’re approved for a mortgage loan. A loan application or new credit card can lead to an inquiry on your credit.

If too many inquiries are made at one time or in a short period, it can hurt your credit score, making you look desperate for money.

This makes lenders wary of your creditworthiness. And even if the inquiries are spread out over time, it can still make you look like you need extra credit.

5. Apply For a Debt Consolidation Loan

A debt consolidation loan takes all your outstanding debt on different accounts and consolidates them into a single monthly payment. This improves your credit utilization rates and helps you avoid missed or late payments.

This is an excellent solution if you have multiple lines of credit that are difficult for you to keep up with.

However, opting for a debt consolidation loan requires you to make a hard inquiry on your credit report. This means that your score will drop by a few points after your inquiry.

That said, once you’re approved, make sure to focus on paying on time above the minimum required amount to increase your credit report.