Monday, April 11, 2011

How to Fix and Maintain Your Credit Score

This post is to help people with damaged credit get it back in shape geared towards purchasing a home. I could write ten pages on this subject but this is just the basics and if your situation is unique feel free to ask for more info or you can email me for privacy.

 Obtain a copy of your credit report, and it is best to subscribe to a monthly credit watch where you can start to see your score increase and keep an eye on it. This can be done by going to Equifax and or Transunion. Keep in mind that most mortgage lenders use Equifax.

 Once you have your credit report, check to make sure there are no errors, as it quite common for this to happen. Report errors to the credit bureau as well to the credit grantor responsible, it may take a month or two for errors to be removed, stay proactive.

 If there are any collections on your report the MUST be paid or resolved, you cannot get an insured mortgage when you have collections. Most of the time collection agencies will settle so you only have to pay a portion of the amount. Just make sure you get a settlement letter and keep proof that you paid it.

 You should have at least two credit lines with a minimum limit of $1,000 each. If you cannot get credit cards then invest in secured credit cards such as the Home Trust Secured Visa Card, I can send you an application. If you are a couple you need two trade lines each. You cannot be a secondary on a card; it probably will not be reported on your bureau. If you are co-applicant on a car loan that should be fine, just make sure you have some credit that is just in your name. The main goal is to have two active trade lines in good standing.

 Avoid credit shopping. If you have too many credit inquiries in a short period of time it will have a slight negative result on your score. Generally you can have your credit checked three times in a year with no problem.

 Always make sure you make your payments on time, never miss a payment. If you are a couple days late don’t panic, just take care of it. Late payments of 30 days or more really hurt your credit score.

 Keep the balance of your credit cards below 40% of the limit. This will really help your score increase, and NEVER go over the limit. Keep a small balance, this helps to show you can handle revolving credit.

 When purchasing a home with 5% down you need at least a 600 credit score and some banks want to see minimum 650. With 5% cash back or commonly referred to as 0% down, you usually need a clean credit report with a 680 credit score.

 It may take a few months or a few years to repair your credit but it is worth it. Rebuilding your credit takes time and discipline. Soon banks will be fighting for your business.

 Once you have been approved for a mortgage, and have a firm agreement to purchase a home, you must maintain your credit score until closing. The bank will do a final check. This means DO NOT purchase items on credit for your home until you get the keys.

 Once you moved into your new home, continue to monitor your score and maintain good credit practice, you will need this when it is time to renew your mortgage.

Please comment or let me know if this post was of any help to you, thanks.

Ron Miller

1 comment:

  1. I have a few inquiries regarding problems fixing an Equifax credit bureau. You can download the proper form here it usually takes 30 days to get a response, then you can call 1-866-204-9044 and actually talk to a person at Equifax.