5 Tips To Repair Your Credit Score Before Applying For A Mortgage

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Bad debt is debt that makes you poorer. I count the mortgage on my home as bad debt, because I’m the one paying on it. Other forms of bad debt are car payments, credit card balances, or other consumer loans.”Robert Kiyosaki

Without a home loan, it is nearly impossible to buy a house. Mortgages are relatively low-interest loans that allow you to build equity over time. As your equity grows, your financial stability does, too. A home can allow you to build a secure place to retire if you do regular payments. Of course, not every mortgage situation is built alike. If you purchased a home during a time of high real estate prices or got a loan with a variable interest rate, you could wind up with a property that is worth far less than you owe. Always research long term trends and research your mortgage agreements carefully before you take any decision.

The information on your credit report directly impacts your credit score. To obtain a credit and to be approved for loans, you should have a good credit score, because, if your credit score is poor, then you will be kept from obtaining credit altogether or you will be placed in a high risk category (which means that if you are approved for credit or loans, the interest rates you will be offered will be significantly higher than someone with excellent credit).

When it comes to repairing or rebuilding your credit, you have two options: either to do it yourself, or to contact the best credit repair companies, that can assist you better managing your finances. Here ar 5 Tips To Repair Your Credit Before Applying For A Mortgage

Tip 1: Pay Your Bills on Time

Late payments are the most common piece of negative information that appears on peoples’ credit reports, even if this strategy seems extremely obvious. Also, it is vital that you always make at least the minimum payments in a timely manner each and every month, with no exceptions.

One of the worst mistakes you can make, aside from making late mortgage payments, is having an account go to collections. This means that you have neglected to pay your monthly minimums or have skipped payments for several months and the account gets turned over to a collection agency. Once this happens, regardless of whether or not you ultimately make the payments or settle the account, your credit score will be negatively impacted for up to seven years.

To protect your credit report and credit score (or begin repairing it), simply to pay your bills on time. It is the best strategy!

Tip 2: Keep Your Credit Card Balances Low

It can be hard to imagine, but having credit cards impacts your credit score. So, your payment history on those credit card accounts also impacts your score. Another factor that is considered in the calculation of your credit score is your credit card balances. Having a balance that represents 35 percent or more of your overall available credit limit on each card will actually hurt you, even if you make all of your payments on time and consistently pay more than the minimum due.

Tip 3: Only Apply for Credit When It’s Needed, Then Shop for the Best Rates on Loans and Credit Cards

If you cannot save a significant amount of money on your purchase over time and cannot justify accepting a reduction in your credit score, then you should not apply for credit you do not actually need.

Tip 4: Separate Your Accounts after a Divorce

It is common for a couple (especially, for a married couple) to obtain joint credit card accounts and co-sign for various types of loans. So, it is necessary for one or both parties in the marriage to re-establish their independent credit. When you do this, start off slowly and build up your independent credit over a few years. Immediately applying for a handful of new credit cards, a new car loan and/or a new mortgage within a short period of time after your divorce, would not help to improve your credit report and credit score. Try to spread out new credit card acquisitions and new loans by at least six months each.

Tip 5: Negotiate with Your Creditors

Contrary to popular belief, your creditors are not your enemies. Your creditors are in business. The nature of business dictates that they earn a profit. When you do not pay your bills, that impacts a creditor’s ability to do business and impacts its bottom line. Many creditors are willing to be understanding of difficult financial situations and short-term financial problems, especially if you openly communicate with them in a timely manner.

So, instead of skipping a handful of payments or defaulting on a loan, contact the creditor as soon as a problem arises and negotiate some form of resolution that is acceptable and within your financial means.

Did this help? Your opinion matters. You can rate this article, leave a comment below or share it on social media. Follow Bobbyfinance for more financial tips.

3 Comments

  1. Richard

    April 23, 2017 at 6:51 am

    Hi Meinna, Nice to see your post. These tips are really helpful for me. I appreciate you.

  2. Richard

    May 27, 2017 at 4:22 am

    Hey Meinna, These 5 tips really helps. Thanks for this great article. I appreciate it.

    • Meinna Gwet

      August 25, 2017 at 12:24 am

      Thanks Richard, my pleasure!

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