How to fix my credit to buy a house?
If you're looking to buy a house, your credit score is an important factor that almost all banks and lenders will look at and analyze. A poor or low credit score means a high chance of being denied for any loan or mortgage. This may lead to abnormal interest rates and difficult payment terms in a few cases.
However, improving your credit score is possible. By following the right approach, you can make yourself an attractive candidate for any mortgage or home loan. In this blog post, we'll discuss tips you can follow to fix your credit to buy a house.
Steps to Fix Credit Reports to Purchase a house
First, Review your credit report.
Reviewing and analyzing your credit report is vital if you want to fix your credit score. In this regard, here are some crucial things that you need to know:
The Credit Age:
Here, the rule is simple. The age of your credit history, or how long you've been using credit, accounts for 15% of your total credit scores. That means with time, your average credit score could go up because of a longer aged account history. Technically speaking, the credit age represents how long you are maintaining successful credit.
The Debt Amount:
The increased debt harms your overall credit score and Debt to Income ratios. Hence it is vital to budget properly & pay your debts timely. This includes all debts such as student loans, credit cards, and others. This is crucial and significantly raises your overall credit score and maintains a healthy DTI for your mortgage lender.
Your Credit Payments and History:
If you fail to pay your due bills timely or default on all your credit accounts, you will not see any improvement in your credit score. You will need to fix these credit issues to buy a house, items such as missed or late payments can severely damage your credit score.
The Credit Lines You Have Opened:
While the number of credit cards you have opened might not be as important as the other factors mentioned above, it affects your credit score and credit mix. For instance, if you have three or four credit cards and regularly pay your bills, you might see an improvement in your credit score. However, that will not be the case if you miss your payments.
File Dispute For Errors and Mistakes:
If you feel or see any unusual thing on your credit report, you need to rectify it as soon as possible. Here we advise you to raise a dispute with the credit agency that is issuing your credit report. Furthermore, you will have to provide the relevant info and proof of the errors to get the mistakes rectified.
Pay Down All Your Debts:
If you have several types of debt, paying them off ASAP can improve your credit score. However, it is not that effective but paying your debts early helps a lot. For this purpose, we recommend you to use the snowball method as it significantly helps to pay off debt faster. The process involves paying off your smallest debts first and a larger one at the end. In between, you will have to pay the minimum payments on your larger debts.
Don’t Purchase on Credit.
Don’t shop from credit cards when paying off your debts, and avoid using other credit lines. Remember, adding and maxing out your debt might affect your score and will not help you pay your debts off faster.
Don’t Use Credit lines.
It’s a bit appealing to open a new credit line but keep in mind that every credit line you open adversely affects your report with inquiries among other things. Closing your lines of credit, even after paying them, is also a downside to your credit score. So, don’t open or close lines of credit if you want to fix your credit score to buy a house, unless otherwise recommended by your credit counselor.
To Sum it Up:
We hope this post contains everything that you need to know and understand about fixing your credit score and buying a house. It’s not easy, but you can do it with the right tools and a lot of hard work. We hope you know how to fix your credit so you can buy the home of your dreams.
If you need some help to get started, contact SmartCredit Choice. We’re here to help.
