How Can I Fix My Credit To Get A Home Loan Fast?
What are the best tactics for first time home buyers to improve their credit in order to get a purchase mortgage loan?
Credit, and credit scores have often been the main factor holding first time home buyers back from entering the market and enjoying all the benefits of wealth building, freedom, and a better lifestyle than homeownership can deliver on. So what are some of the best ways to fix up your credit on the fly so that you can buy a home and take advantage of today’s great home prices and mortgage loan rates? How do I fix my credit? Read on to know simple solutions to fix credit score and get home loan fast.
How Can I Fix My Credit?
Know the Requirements
First, it is wise for first time home buyers to speak with a mortgage lender and loan officer. Many would be buyers may find that their credit and score is not the obstacle they think it is. Find out the requirements, and if there is a gap before taking a potentially lengthy, expensive and time consuming detour.
For those hopeful home buyers falling short of the credit scores and requirements they need to get the purchase mortgage loans they need there are a number of ways to tackle the situation and get approved in pretty short periods of time.
Recognize Guidelines and Modeling Systems
However, before digging in it is important for home buyers to recognize that underwriting guidelines and the modeling systems used to score borrowers can change, and do change frequently. Fortunately, there are some general rules which have remained consistent for years, and through various modeling changes.
Beyond credit scores (and a part of what decides them) is depth and breadth of credit history. Some may only be held back by limited credit history. Some may be able to counteract poor credit or old bruises by establishing new credit. Underwriting guidelines for many programs look past the score to look for a reasonable number of trade lines, size, and type. So perhaps requesting a credit limit increase or reactivating a dormant card might be all that is needed. Some may even have positive credit lines that aren’t showing up on credit reports which could help if they are added.
Keep Credit Balance Below 50%
Perhaps most significant of all when it comes to fixing credit score and getting approved for a purchase mortgage is credit balances. First time home buyers should strive to keep balances below fifty percent, and preferably below thirty percent of their credit limits to achieve their maximum credit score.
Don’t Fall Behind on Payments
When tighter financial times do arise and there is no way to avoid falling behind on payments at least be strategic. Remember that you credit won’t be negatively impacted unless you are 30 days late. If you have to skip payments, skip those that aren’t reported on your credit first. Then revolving debt like credit cards. Then installment loans. Preserve your mortgage credit at all costs. This is the scale which credit bureaus use, and how they weight the impact of lates on scores.
Few Americans escaped foreclosure in the recent crisis. Far fewer came through the crises without some blemishes on their credit. So what are the best options for patching up bad credit? Or is time the best healer?
There are many credit repair companies actively advertising out there. However, these services do need to be approached with care. Some haven’t provided much help, despite high fees and lengthy periods of waiting. They will also tell you not to apply for credit or take out new loans for however long they are working on your credit. That may be counterproductive for those hoping to buy a home fast. Some alternatives may be using your own attorney to challenge negative items, or using ‘rapid rescore’ solutions recommended by mortgage lenders and brokers. These may deliver the most value and effectiveness.
Still there is no reason why first time home buyers can’t get incorrect items removed from their credit reports themselves if they have documentation to back it up. If you didn’t miss payments when late payments are being reported contact the credit bureaus and creditors with your recipes and request a correction.
In some cases it may make sense for buyers to pay off or down debt, collections and charge offs. However be careful and do the math. Ask your loan officer if it makes more sense to put that money towards down payments or buying down interest rates.