Credit Repair Tips for First Time Home Buyers

How to Fix Your Credit Bad credit can be a problem when it comes to buying a first home. A low credit score and negative credit history can make it difficult to get a mortgage or get a good interest rate. Repairing your credit can open up possibilities that make home purchases possible.

The following tips will help you build back your credit and establish a good credit score.

Give Yourself Time

Good credit doesn't happen overnight; it may take several months before your credit score begins to improve. To ensure that you’re financially ready to buy a home when the time comes, give yourself time before beginning the house hunting process. Allowing your credit score time to improve will help ensure that you’ll be in a good position to buy when the time comes. 

Get a Credit Report

Consumers in the United States are allowed to obtain one free credit report every year. You can request your free credit report at annualcreditreport.com. When you get your credit report, look it over for errors and make corrections as necessary. Corrections can be made by sending a letter to the credit reporting agencies. The process for requesting a free credit report and disputing credit report errors is outlined on the FTC website.

Get Current With Payments

Late payments reflect badly on your credit report, while timely payments help improve your credit score. To repair your bad credit, you may want to start by paying extra money toward your late payments until you’re current with all your creditors. Once you’re current, stay current. Remember that negative marks on your credit count for less when they’re in the distant past, so as you continue to make timely payments, your credit report will continue to improve.

Reduce Your Debt

Debt can damage your credit if your balance is near your maximum credit limit. Reducing your debts will help improve your credit. To reduce your debt, dedicate the majority of your monthly payments toward the loans that have the highest interest rates, and make the minimum payments on your other accounts. When one account reaches a balance of less than 30% of the possible credit on that account, focus your payments on another account.

Establish Good Credit After Bankruptcy

If you have a bankruptcy in your credit history, the best way to repair your credit is to show that you can responsibly make monthly payments to creditors. This can be done by accruing a small balance on one or two credit cards, and making monthly payments on time.

It may be prudent to avoid opening too many accounts at once. You may also want to be careful not to carry too large of a balance at any time that you may not be able to pay back.

Watch Your Credit Score

Watching your credit score may help you determine when you’re ready to buy a home. There are many free credit score services available to consumers. Checking your score periodically will help you estimate when you will be looking like a less risky prospect to lenders.

Consult with a Mortgage Lender

Even if you’re not ready to buy a home yet, it may still be a good idea to consult with a mortgage lender. Your lender can check your credit, make suggestions for improving your credit and can also go over the various types of loans that will be available to you after your credit has been repaired. Some types of loans may be available sooner than others. Talking to your mortgage lender will help you establish a timeline that will determine when buying a house will be realistic.

Repairing credit takes time and consistent effort, but it is a very possible goal to achieve. If you have aspirations of owning a home, working toward good credit can be highly beneficial to you in the long run.

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