Repairing Your Credit Score Before Buying a Home

    Before you buy a home, it’s important to know what your credit score is as it will determine the interest rate you qualify for… or even if you can qualify for a loan at all. If you’ve checked your credit score with the credit-reporting agencies (Equifax, Experian and TransUnion) and have found that your credit score is less than you were hoping, there are a few ways to raise your score. Unfortunately, raising your score takes time and so it’s ideal for you to first check your score at least a year before you want to buy a home so that you have the time to fix it. If you find yourself needing to raise your score during the next year, here are the things you need to do:

    – Find inaccuracies in your credit report. You could have incorrect information on your credit report for any number of reasons. Oftentimes billing errors, inaccurate contact information and identity theft can lead to major credit score dings in your name. If you find something incorrect in your report, contact the credit-reporting agency and then document for them what needs to be change. The credit bureau will then work with the creditor to correct your report within 30 days. A change in your actual credit score should follow shortly behind that.

    – Pay down your debts. If you have the cash to spare (in addition to what you’ve been saving for a down payment), pay down some of your largest balances over the next few months. Even paying just a little can sometimes give your credit score just enough of a boost to make a big difference.

    – Don’t open or close new accounts. Up-to-date accounts and your oldest accounts actually help to raise your credit score as they demonstrate your ability to pay your bills on time. If all of your debt is on one account but you have others available, you could consider transferring some of your debt to other cards so that the percentage capacity is distributed evenly among your accounts which would help to bump up your score over time.

    – Don’t file for bankruptcy. Whatever you don’t, don’t throw in the towel and think you can start clean! You may not be able to qualify for a mortgage for ten years after filing for bankruptcy, so it should be used as a last resort. If your credit feels helpless, work with a debt counselor who can help you make short-term and long-term goals so you’ll be ready to buy a house in no time!

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