Are you finally ready to stop renting and own a home? If so, your biggest hurdle to overcome may be your credit. A mortgage lender will look at your credit very closely, and you'll need to be pre-approved for a loan before you can even think about purchasing one of your own. However, people with bad credit can take some steps to increase their credit score and get them a loan.
Request Your Credit Report
Were you aware that you can request a free copy of your credit report each year from all three credit reporting agencies? If you have not done it yet, now is a good time to see exactly what is on your credit report.
You'll want to understand what debts are on your credit report so that you can learn how to fix it. There may be an issue you are totally unaware of or a mistake caused by a paid off debt that was never reported to the credit reporting agencies.
Pay Off Those Debts
You should realize that there is both good and bad debt, and that is taken into consideration when looking at your credit report. Existing loans for school or a car are not ideal but are viewed as a good debt because it is used to put yourself in a better financial position by becoming educated or securing a valuable asset. Credit card debt is not looked at as favorably.
Make it a priority to pay off credit card debt first to improve your credit card. Once you have a card paid off, do not close the account. Part of your credit score is based on how much self-control you have over your lines of credit. Having cards with little to no balance will show that you are able to manage your money and not spend your entire credit limit.
Increase Your Credit Limits
It may seem counterintuitive to increase your credit card limits, but it can actually help you. This plays into how much of your credit limit you are utilizing, and having more credit will make your existing debts have less of an impact on the utilization. For example, having $100 in credit card debt on a card with a $1,000 limit will show that you are utilizing 10% of your credit. If you can raise your credit card limit to $2,000, it just cut your credit utilization in half to 5%. Small changes like this can go a long way in improving your credit score over time.
If you do not have the time to improve your credit score for a better mortgage, consider working with a lender that can provide a loan geared towards people with bad credit. For more information, contact a company like SWE Homes.Share
30 April 2018
I have always been someone who is passionate about making the world around me more beautiful, which is probably why I was drawn to real estate initially. I really wanted to create a place where me and my family could spend a lot of time together in a peaceful, relaxing place, so I started looking for places in my area that were fit for the job. Within a few months, I was able to find an incredible property that was within my price range, so I purchased it as soon as possible. This blog is all about choosing beautiful real estate.