Frustrated with your low credit score? Trying to get your score up to the point of getting approved for a mortgage can be very frustrating. Below are 7 steps to get you on your way, but if at any point you seem to be stuck and can’t get any further, please don’t hesitate to reach out! I have several great resources I can help you with, one is my fantastic lender!
If you want to purchase a house in the next few months, but can’t seem to get your credit score up, try these 7 steps to increase it quickly.
Sometimes your low score is due to negative things on your report, such as late payments, collections, etc.
Sometimes though, you may simply have NO credit score, due to nothing good or bad on your credit.
Most of the time, however, people have a combination of these. They have collections, late payments, but then nothing positive to counteract those negative accounts.
1. Reduce each credit card balance to less than 30% of your limit.
Many times companies such as CreditKarma, just look at your overall balances with the amount of your total credit limits. When a lender pulls your credit, however, they are looking at the % charged on each account.
For simplicity sake, let’s say you have 3 credit cards with a $1000 limit on each one. Two of the cards don’t have any balance, while the 3rd one is charged all the way to your limit. While CreditKarma may say you are only utilizing 33% of your credit limit ($1000 out of $3000), a lender is going to see that you have one card maxxed out.
It would be MUCH better to have $290 charged on each of the 3 cards, as this keeps the entire balance under 30% utilization.
Should you just pay off a credit card? There are times when this might be the best, but when trying to boost your scores, the best way to handle your credit card balances are to reduce them to a minimal amount, but do not pay them off. Continue to use and make a payment, etc.
For instance, I always recommend for potential buyers to use a credit card to pay a smaller bill, such as your phone bill. And then just a few days later, go ahead and pay that credit card, but not to zero. You can even pay it down to $10 or $20 dollars, but NOT to zero.
Negotiate with collection accounts to pay a lump sum for deletion.
There are specifically 2 types of collections account when you are looking to get a mortgage. Medical collections and consumer collections.
If you are trying to get a government loan, you don’t have to necessarily pay off your medical collections to get approved. You would want to talk with a lender specifically about this. If you are aiming for a higher credit score and a conventional loan with a larger downpayment and better terms, you would want to pay off all collections.
With any collections, if you can pay a lump sum, meaning not make a payment plan, you can usually negotiate for around 50%-70% of the original balance. Once paid, request a letter of deletion from the collection agency.
I understand that sometimes accounts go to collections as a matter of principle, meaning you feel like something was unfair, or not done correctly, or whatever. Or it was purely a mistake on your part. Unless you can prove it, you are going to have to just bite the bullet and pay the debt, if you want to raise your score and buy a house.
I will say, that it is good to talk with a lender before you pay off collections accounts however, just to make sure you aren’t paying something unnecessarily.
Request that a creditor remove your random, one-time late payment.
Many times, if you have a great track record for paying a creditor on time, but you either just forgot one time or you had something that specifically happened that caused you to be late one time, you can appeal to the creditor and ask them to remove your late payment from their records, so it will not report as a late to the credit bureaus.
File disputes with the bureaus to remove erroneous information.
If there is a debt that is completely in error on someone else’s part, you will need to dispute it to have it removed. You will need some sort of proof however, you can’t just report that something is wrong without something to back it up. This can be a bit frustrating, and each agency has their own process, but it will be worth it in the end to push forward and get the erroneous information removed from your report.
Build positive trade line by applying for a secured credit card.
To get a few positive tradelines, it is crucial to open one or two credit cards, FOR MINIMAL USE. If your credit is too poor to qualify for a regular credit card, you can get a secured card at the link below. A secured card requires that you put a sum in a savings account and then they will give you a card with that same amount of a credit limit. Use your new credit card wisely, like I mentioned in tip #1. This company reports to the bureaus very quickly. https://www.openskycc.com/
Open a credit account at a local furniture company.
There are several local companies that will extend credit to you to purchase something with little to no credit. Don’t use these accounts to buy $2k worth of furniture, but buy something that you need just over the minimum for charging, usually around $500. Pay it back quickly by making double payments.
I know that Farmer’s Furniture doesn’t do a credit check, and Badcock’s has a pretty lenient lending policy also. If you use a different company, be sure to ask if they report to credit bureaus before you apply for an account.
Always, always pay your bills on time or even early.
Sometimes a low score is simply due to not paying your creditors on time. This may be to just forgetting, or maybe due to not having the money at the right time. Creditors don’t want to hear this. They just want to know that you are going to pay like you said you would. Take the necessary steps now to ensure that all payments are made on time in the future. Unfortunately, to lessen the effects of multiple late payments on your credit score, you simple have to let time pass to age those late payments to at least 12 months out.
If you have any questions at all about the process of getting approved or buying a house, send me a message via my website form or simply text me at the number below.
Or, you can send me a message and I’ll connect you with my lender who does free credit coaching!
Bernice Hemmings, REALTOR American Realty Professionals 770-854-1330
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