Qualifying For A Mortgage: How To Repair Your Credit

Even mortgage products that are designed for people with less than perfect credit will often come with a minimum credit score that must be met in order to qualify for financing. If your credit has taken a serious hit due to poor financial decisions in your past, you may need to do a bit of credit repair before you are able to qualify for a mortgage. The steps outlined below will help you to accomplish this goal by not only removing negative lines from your credit report, but also helping you to add some positive history to this report as well.

Step #1: Obtain An Official Copy Of Your Credit Report From All Three Major Credit Bureaus

There are a variety of websites out there that claim to offer you free access to your credit report. The problem is, the reports that are furnished by many of these sites are not the same reports that lenders see when you apply for a mortgage. Consequently, attempting to repair your credit based on these reports could result in a surprising denial the next time you apply for a mortgage.

To ensure you are receiving the same credit report as your lenders, you will need to contact each of the three major credit bureaus directly. Under current laws, this report must be furnished to you at no cost once each year. However, if you request your credit report multiple times throughout the year, you should be prepared to pay a small fee for each of these reports.

Step #2: Dispute Old And Incorrect Data On Your Credit Report

The information provided to credit bureaus is not meant to follow you for the rest of your life. The problem is, if you do not actively request that old accounts are deleted from your report, these negative lines will rarely be deleted automatically. Take the time to go through your credit report line by line and identify any accounts that are more than a few years old. When requesting that these accounts are removed from your report, remember to always send separate letters to each credit bureau as each bureau is responsible for maintaining their own records.

When completing this step, you will also want to identify any information that is incorrect or fraudulent. In order to have this information removed from your credit report, you will need to provide proof that the debts reflected are either incorrect or were not obtained by you.

Step 3: Contact Creditors To Set Up Reasonable Payment Arrangements

In many cases, you will not need to repay all of your debts in order to qualify for a mortgage. Instead, you will simply need to replace the negative standing from your credit report by bringing your accounts up to date. By establishing payment arrangements with your creditors and sticking to the terms of these agreements, you will be able to ensure that each of these accounts once again reflects positively on your credit report.

Step #4: Establish A New Line Of Credit

Mortgage lenders rarely want to be the first person to trust you with a new line of credit after suffering some financial setbacks. To prove your creditworthiness, you will need to establish a recent line of credit. The best way to do this without risking further damage to your credit is to apply for a secured credit card.

In order to ensure your new line of credit reflects positively on your credit report, you will need to ensure you are using this line of credit each month and that you are actively paying off the balance of this credit card each month as well.

In Conclusion

Your credit score will play a large role in your ability to obtain a mortgage loan. If your credit score is currently preventing you from getting the financing you need, there is no reason to give up on your dreams of owning a home. In fact, with just a bit of hard work and perseverance, it truly is possible for anyone to repair their credit and ultimately accomplish their goal of home ownership. For more information on the particulars of lending as it applies to a specific bank, contact them directly (banks being WesternBank or another one).