If you’re considering purchasing a home and have bad credit, you’ll want to start today getting your credit cleaned up to boost your FICO Score. Improving this very important number on all three credit bureaus will allow you get approved for the home of your dreams and help you save money on your interest rate. So how can you fix your credit and boost your FICO Score to get ready to purchase your dream home? Well here’s how…
Know Your FICO Score – Obtain a Credit Report & Dispute Errors
Credit reports are known for their accuracy and often have many errors on them. Obtaining a copy of your credit report will help you know your FICO Score and identify any errors on your credit report including duplicate collections or other accounts that are damaging your FICO Score. According to a recent study by the Federal Trade Commissions, nearly 1 in 4 consumers have inaccurate information on their credit report and in 5% of those cases, the errors cause consumers to not qualify for a mortgage.
The credit reporting agencies (Equifax, TransUnion, and Experion) all provide consumers with one free credit report per year and we encourage you to take advantage of this. Mortgage lenders will pull your credit from ALL of the three credit agencies and go with your middle score for qualification. Get your credit report and dispute any errors on the report.
Still Overdue? Negotiate Payment Terms With Your Creditors
If you’re overdue on a payment, it will weigh heavily on your credit score. As your payment history makes up a full 35% of your FICO score, this is one area where you’ll want to invest a great deal of time and effort.
Contact any creditors you owe money to and ask if you can negotiate your bill. The ideal outcome for you is to have the creditor report your debt as paid in full, so see if you can secure that promise in writing in exchange for an accelerated payment schedule.
Maintain a Low Credit Utilization Ration to Boost your FICO Score
Your utilization ratio refers to the amount of credit you use at any given time. If this number goes beyond 30 percent, you’ll start to see your credit score drop. Ideally, you should aim for a utilization ratio below 10 percent – this will prove to your lender that you can responsibly pay for the credit you use.
Automate Recurring Bill Payments to Avoid Late Payments
Automating your monthly payments can be a great way to boost your credit score. Whether it’s your mortgage, your credit card, or your student loan, a pre-authorized monthly payment will ensure that everything gets paid on time and give you a great credit history.
Your FICO score is a number that will determine your eligibility for mortgages and other loans.