Your credit score is a key determining factor in getting a home loan and dictates what interest rate your lender will offer on the loan. I will illustrate some helpful credit repair tips for buying a house in San Diego. Why is a credit score so important in buying a new home? Your credit score tells a story of how you pay back debt. Your FICO score is a financial payment history of your financial commitments such as utility bills, loans and current debts. Your mortgage lender wants to know if you are a risk in paying them back.
If your credit score is low, then you may not qualify for a home loan. Or your low credit score could mean that the bank will loan you money, but with a higher down payment and at a higher interest rate. You’ll want to boost your credit score before getting a home loan to avoid paying more. By taking steps to repair your credit score, your chances of getting a home loan with a lower interest rate increases. Here are 9 Credit Repair Tips for Buying a New House:
Credit Repair Tips For Buying A House
- Knowledge – Start with knowing what your credit looks like by obtaining a free report from all 3 agencies: Experian, Equifax, TransUnion. com is authorized by the government to give you a free credit report every 12 months.
- Time – And you may not have time. But it’s very helpful if you have 6 months to a year to improve your credit score to buy a house. Pay all your debts on time for a year and you will see a marked increase in your score. You will even see an increase in as little as 2 months. If you don’t have a credit card, then get one. Put expenses like groceries on your new credit card. These should be expenses that you know you can pay off. Over time you will build your credit score.
- Accuracy – Do a thorough review of your credit reports from all 3 agencies. Experian, Equifax and TransUnion may report different information and you need to know if something fraudulent has been reported.
- Fix it! – If fraudulent reporting is on your credit reports or if negative marks on your credit are older than 7 years, then you need to correct errors on your credit report by contacting the credit bureau and the company that provided that info to them. Keep a copy of all correspondence. (Note, a bankruptcy will stay on our credit for 10 years.)
- Personalize it – If you have legitimate negative marks on your credit, but you feel like you have a reasonable explanation for them; then you can contact the credit reporting agencies and ask that they attach a personal explanation from you. The mortgage lender might see this and take it into consideration when deciding to offer you a home loan. You might also try writing a letter directly to your mortgage lender explaining if there is a reasonable explanation for your low score.
- Control your Spending – Don’t make big purchases that you can’t pay back right away. Your credit card balances should not exceed 30% of your credit line. Do not try to finance something else, like a car, while you are trying to improve your credit score to buy a new house. You don’t want to do anything to mess up your credit ratio.
- The Basics – Practice the basics of improving your credit score: Transfer or spread out balances on cards that are about to max out. Do not close unused accounts, especially keep open the oldest accounts. The length of your credit history factors into your credit score. Try not to open any new credit card accounts while you are trying to improve your score and keep your credit card balances low.
- Shop Around – There are lots of mortgage lenders to choose from. Many have experience working with consumers who have low credit scores and can be helpful to you. Which leads me to my last tip…
- Rapid Resourcing – This is a procedure that your mortgage lender can try. Consumers cannot do this on their own. Rapid Resourcing is a way to rapidly lift your credit score by updating your credit file. The mortgage lender’s credit report’s entity corrects and updates your credit information and then submits it to the credit bureaus. It won’t change valid negative marks to your credit, but it can rapidly improve your score once corrections are made to mistakes on your credit report.
Fix Bad Credit To Buy A House
Once you have cleaned up your credit score, you can then reach out to a mortgage lender to get yourself a pre-approval certificate. This will give yourself a tremendous peace of mind to start your house hunting. If your credit score is still lower than you would like, then you can try improve your chances of receiving a home loan if you can prove you have worked in the same field for 2 or more years. One thing to note if you’re trying to figure out what should your credit score be to buy a home is your chances of receiving a loan also greatly improve if you can pay 10-20% down.
Be aware of credit repair companies who charge upfront fees. There is a lot of free information out there on tips for improving your credit score to buy home. At the Gamez Law Firm, we offer a free downloadable eBook called The Ultimate Guide to Your Credit Score and Credit Repair. And if you have any other questions, feel free to give me a call for a free consultation at 858-217-5051.
Daniel R. Gamez, an attorney focusing exclusively in debt relief, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego, CA. For more information, please contact Daniel Gamez at 858-217-5051, firstname.lastname@example.org or use our online contact form. Stay updated with the latest debt relief tips by following on Facebook and Twitter!