Most of us, at some time or another, have done something to affect
our credit rating, perhaps without even knowing it. A late or missed credit
card or home mortgage payment is just one example. When you buy a home, your
real estate agent will encourage you to get pre-approved for your mortgage.
It's during the home loan application process when problems often come to
light.
For
home loan purposes, a score of 650 or higher generally indicates a good credit
history and will make it easier for you to secure a mortgage. If your score
falls between 620 and 650, your borrowing capability will be examined more
closely. And if you rate below 620, you may have a credit crisis. When you’re planning on buying a home, your
credit score will have a big impact on your interest rate and loan terms. If
your score falls on the lower end of the scale, you’ll pay a higher interest
rate. Dip too low, and you may not get approved at all.
Blemished credit is both stressful and costly, but it's not the end. As
hopeless as the situation might seem, bad credit won't last forever. There are
things you can do right now to begin improve your credit score.
In my 12 years of being a loan officer I am always asked,
“What should I do to fix my credit?” I normally recommend 3 things to do.
1. If you have a serious credit problem and/or a lot of
collections (anything over 6 collections), I recommend you go to a credit restoration
company. If your collections are $500 and under, I suggest you pay them and get
them out of the way. As a rule, If your collections exceed $1,000 and are more
than 2 years old, you can leave those alone for now. When you are trying to
repair your credit with credit restoration companies its best to go with local
companies, it would be most convenient for you. In addition to this, you would
need to have at least 3 open and current lines of credit.
2. Secondly, if you do not have 3 lines of credit, you
should open 3. Understand that if you have bad credit or low credit scores it
would be difficult to find someone to give you a loan. Here’s the trick! Upon
your first payment, you should go pay off 50% of your loan. For instance, if
you get a line of credit for $500 pay off $250 on the first payment, if you get
a line of credit for $1,000 pay off $500 etc. This will give you an immediate boost
of 10+ points on your credit score. Just be mindful that you have to pay off
50% or more on your first payment.
3. Lastly, the easiest thing you can do is visit your
local Credit Union and open 2 secure loans. If you are married open jointly
secure credit lines. For the third account, open a secure credit card. You
should only charge 10% of the limit and never exceed 10%, this will give you a
boost on your credit report.
It's important to note that repairing bad credit is a bit like losing
weight: It takes time and there is no quick way to fix a credit score.
If, after all your work, you still score below
the 620 mark, it doesn't mean that you won't qualify for a home loan. It may
mean, however, that your mortgage will take longer to process and the terms and
interest rate may not be as good as you were hoping for. Talk to your real
estate agent about referrals to high-risk lenders.
Repairing bad credit can take many months to a
year or more. But when you're ready to buy a home, you'll be glad you took the
time to improve your score - and your mortgage payment will be lower because of
your efforts.
NuHome Group 713-373-0345
1445 North Loop West Suite 105 Houston, TX 77008
Frank Marta NMLS# 245813/835196
