Most people know the importance of maintaining a high credit score, especially when weighing financial options for purchasing a home.
But what if you’ve fallen behind on payments and your credit score has suffered as a result? What can be done to help bring that score back up to where it should be?
In a recent article on Realtor.com, Jamie Wiebe shared these useful tips for individuals who are trying to rebuild their credit score:
Pull your credit report
There are three major U.S. credit bureaus (Experian, Equifax and TransUnion), and each one releases its own scores and reports. (A report is a more detailed history that’s used to determine your score.)
Their scores should be roughly equivalent, although they do pull from different sources. For example, Experian considers on-time rent payments, while TransUnion has detailed information about previous employers.
It’s also a good idea to check with your credit card company. Many include free access to scores and reports. Check with individual companies for details.
Assess where you stand
It’s simple: The better your credit history, the higher your score – and the better your opportunities for a home loan.
The Federal Housing Administration requires a minimum credit score of 580 to permit a 3.5% down payment, while major lenders often require at least 620, if not more.
So, what can you do if your credit report is in less than shipshape? Don’t panic; there are ways to clean it up.
Improve with error disputes
A 2013 Federal Trade Commission study found that 5% of credit reports contain errors that can erroneously ding your score. So, if you spot any, start by sending a dispute letter to the bureau, and provide as much documentation as possible.
You’ll also need to contact the organization that provided the bad intel – it might be a bank or medical provider – and ask it to update the info with the bureau. This might take a while, and you might need documentation to make your case, but once the bad info is removed, you should see a bump in your score.
Erase one-time mistakes
So you’ve made a late payment or two. Who hasn’t? Call the company that registered the late payment and ask it to remove it from your record. If you had an oopsy and missed only a payment or two, most companies will tell their reporting division to remove it from your credit report.
Increase your limits
One no-brainer for increasing your credit score is to simply pay off your debt. Not an option right now? Here’s a cool loophole: Ask your credit card companies to increase your credit limit instead.
This improves your debt-to-credit ratio, which compares how much you owe to how much you can borrow.
Pay on time
If you’re often late with payments, now is the time to change. You have the power to improve your credit score yourself. Commit to always paying your bills on time and consider signing up for automatic payments so it’s guaranteed to get done.
Give yourself time
Unfortunately, negative items (such habitually late or missing payments) can stay on your report for up to seven years. The good news? Changing your habits makes a big difference in the payment history segment of your report, which accounts for 35% of your score.
That’s why it’s essential to start early so you’re sitting pretty once you’re shopping for homes and find one that makes you swoon.
Maintaining a healthy credit score is very helpful when looking to purchase something as expensive as a car or house.
When you’re looking to purchase or sell real estate, utilize the expertise of a Realtor to make the process as seamless as possible. Realtors work for their community every day. That’s Who We R.
Founded in 1912, Greater Chattanooga Realtors is a regional organization with more than 2,500 members servicing Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. The association is one of approximately 1,100 local associations and boards of Realtors nationwide that comprise the National Association of Realtors. Greater Chattanooga Realtors owns and operates a multiple listing service that’s one of approximately 600 MLSs in the country and services more than 2,700 users.