 |
|
|
|
Contents
|
|
|
|
|
|
|
|
|
|
Repair your credit, then apply for a loan
There are a number of considerations that go into deciding who will get a home loan and how much they will have to pay. The primary source of that consideration is your credit report. If you have an unhealthy past history of financial trouble, you will have problems getting a home loan at a favorable interest rate. The first step in buying a home is making sure that your credit is in good shape. After that, it’s easy.
|
|
|
|
|
|
The credit report is a document offered to lenders by the three major credit bureaus. This report offers a listing of every line of credit, loan and credit card you currently hold, along with every debt you have had during the past seven years. If you have ever had a judgment against you or if you have ever filed for bankruptcy, it will be listed there along with how often you have paid late and whether or not your loans have been “paid as agreed.” Your report will also include your credit score, which is a number from 300 and 850 that represents, in a nutshell, how worth of credit you may be. The higher the score, the more likely you are to be able to receive a loan at a favorable interest rate. Almost anyone can get a loan, but only people with good credit can receive affordable loans. And that is what you want.
What if your credit is in bad shape? Can you enlist the services of one of those companies that promises to repair your credit? Sadly, no. There is no such thing as a quick fix for bad credit, and the companies that offer to do so are simply trying to take advantage of you. That bad news is that you will have to do it yourself and that it takes time.
|
|
|
|
There are several things to consider if you are going to fix your credit:
- It takes time. Give it a year if you can; six months at least. There is a lag between when you pay a bill and when it will show up on your credit report. The sooner you get started, the sooner you will see results.
- Pay your bills on time. This is key; some 35% of your credit score has to do with whether or not you pay your bills promptly. That makes sense; lenders want to get their money. Start making an effort to pay each and every bill you have on time, every month. If you have to, arrange to have the money automatically deducted from your bank account. This point cannot be stressed enough - pay on time every month.
- Watch your debt ratio - Lenders are concerned about how much you owe, but they are also concerned about how much you owe compared to how much you could owe. The ratio of how much you owe to how much credit you have is your debt ratio. You want to make sure that you owe no more than 30% of the maximum that you could. Less is better. Be careful about this. If you cancel a credit card with a $10,000 limit on which you owe no money, you could actually hurt your debt ratio of you have large balances on other cards.
It’s fairly easy to fix your credit. The hard part is being diligent and realizing that you cannot pay someone to do it for you and that you cannot do it overnight. If you need to improve your credit before applying for a home loan, get started right away. It takes time.
If you have a home loan with a high interest level, you may wish to contemplate refinancing your mortgage. You may be able to manage your debts and lower your mortgage payments. Ameriquest can make it easier to refinance now.
|
|
