Owning a house is a dream almost everyone shares. But buying a house is not a very easy task. Higher property values and inflated mortgages can really hinder that dream. But there is one thing that can turn this dream into a nightmare: Bad credit.
Before even dreaming about repairing something in your new home, you need to focus on the fast credit repair for the mortgage. A higher credit score will be your greatest ally in getting you a reasonable mortgage. So if you are shopping around for a mortgage, it’s better to try and raise your credit score fast. There are some steps that can help you achieve a higher credit score fast.
A Clean Payment History
Payment history is usually the largest factor contributing to your credit score. It makes up 35% of your FICO score, which most lenders will probably refer to. If you have a squeaky clean payment history then your credit score can really benefit from that.
The bad news is that delinquent payments stay on your FICO scores for up to seven years. This may seem like a lot, but you don’t have to wait seven years to improve your credit score. Even if you have missed payments in the past, you can change this trend immediately. Once you start paying off well in time, this new trend will reflect on your credit score.
An ideal solution to that is to put all your regular payments, like your utility bills, on automated monthly payment. You won’t have to keep continuous track and miss any because of human error, and they won’t be late.
The next significant chunk of your credit score is the “amount owed”, or simply, your debt. It makes up for 30% of the FICO score. The easiest and fastest way to fix it is to pay your credit card debts off in a timely manner. An even better approach will be to pay off your credit card as soon as they are charged. Because if your data is pulled mid-month, the current debt might push down your score a bit.
The credit reporting agencies don’t have access to your income information. So they use your credit utilization to figure out your debt-related score. Simply put, if your credit limit is $20,000 and your balance is $5000 that makes your utilization ratio at 25%, which is good enough. People with the most stellar credit scorers usually have a utilization ratio of around 10%.
Credit Card Management
A lot of people make the mistake of shutting down their credit cards to raise credit score fast. This can actually lower your score because when a credit card shuts down, it takes its history and credit limit with it. Keep your credit cards in circulation, and use them, though less frequently, and pay them off as soon as you can.
Small subscriptions like Netflix that are automatically deducted from your credit card can be best for that. They will keep your credit card effectively running and help you build good credit. It is also not a good idea to apply for new credit cards to increase your credit limit as well. If your credit is not very good, applying for a new credit card can invoke a “hard inquiry”, which lowers your credit score and stays for two years.
Check Your Credit Report and Challenge Discrepancies
This should the first thing you want to do when you start fixing your credit. The three credit reporting companies are liable to give you one free credit report a year. It’s a detailed breakdown of your credit history, which helps you spot the areas bringing down your credit score. You can work on those factors to achieve a higher credit score.
According to an FTC study, one in four credit reports had errors with a noticeable impact on the credit score. Whatever the reason behind those errors might be, the point is that you can challenge them. Challenging credit discrepancies also works for removing late payments from your credit score.
People managed a jump of more than 80 points in their credit score, in a single month- just because they properly disputed late payment discrepancies with their credit reporters. It also works with any score drop you incurred because of hard inquiries.
Pay Collection Agencies for Delete
This is a bit of a legal and ethical grey area. If some of your debt has been transferred to collection agencies, you can contact them about the full payment and removal of that debt. It doesn’t frequently happen. Mainly because the agencies are expected to report the accurate financial histories of the debts they are managing.
But if the debt cannot be removed from your credit history, paying them once in full won’t help your credit score. You can work out a schedule with your collection agency.
Become an Authorized User
This works wonder for people with no or very little credit history. For people with bad credit who want to get a higher credit score, it is marginally successful. If you have a family member or friend with a good credit history, try becoming an authorized user of their credit cards. Even if you don’t use the card at all, it helps give your credit score a boost. Association with a strong account with a good credit score also gives your credit a bit more credibility.
Some financial discipline, use of these tips and effectively managing your expenses will start to show up on your credit score. Maybe not in a month, but you might see the improvement in two to three months. But it’s important to understand that in building a higher credit score, time is your ally. The more time you invest in building a good credit score, the better.
Any extra amount you spend when going for fast credit repair for a mortgage will be worth it. With a better credit score, you might be able to qualify for a decent mortgage. It will also save you from some insurance that people with bad credit have to pay for, to qualify for a mortgage. In the long run, you will be able to save much more.