For many first time and upgrading property buyers, stricter credit requirements have become the downfall in the plight for home ownership.
With tighter credit requirements, what’s a person to do to be able to gain ground in the real estate market?
Improve your credit score, streamline your unnecessary debts, and save up for a down payment.
Improving your credit score can improve the interest rate you receive on a mortgage.
The steps to credit improvement:
Pull your credit file from all three major credit reporting agencies, Equifax, Experian, and Transunion. You will need a highlighter and a piece of paper to get started.
1. Check to make sure all of the information about your name is correct.
What’s in a name? Everything. Check for deviations of your name that you do not use. Make sure all addresses listed were/ are yours. If you see a deviation that you have never used, then you may be a victim of identity theft, or your credit file has been merged with someone else’s file. Eliminate the fake you if one exist.
2. Make sure that all accounts listed are only listed once.
If a creditor, such as a school loan or credit card placed duplicate negative information in your file you will need to dispute it. The information will be removed, the duplicate and the original.
3. All information on your credit file should be up to date.
If you have an old negative on the report, something that was 7-10years ago then have it removed. This does not apply to unpaid student loans. But, if the student loan appears on your report more than once, or has an incorrect amount as owed or paid, or shows you were delinquent when you were not delinquent, any errors require that the information has to be removed from your credit file.
4. If you have many outstanding credit cards with high interest rates, you may want to consider a personal loan.
Personal loans tend to have a higher than a mortgage interest rate, but can be lower than some credit card interest rates. Mainly because a personal loan is an unsecured line of credit.
You will need to find a lower interest rate loan to pay off the higher interest rate credit cards. Once you have the loan, and then consolidate all the higher interest rate credit cards into the one lower interest rate loan. Often times this can free up money since you will be making one payment instead multiple payments.
Just remember once you pay off your credit cards with the loan, the credit cards become, For Emergencies Only. Try not to use the credit lines until the personal loan is paid off, you would not want to double your debt.
The 4 steps is a process which can improve your credit score, but each situation is different but improvement can be seen in as little as 3months.
At the beginning of our article we gave you your first check mark, now it’s up to you to give yourself the other check marks for completing the 4 steps.
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