Credit scores are a major component of securing a favorable mortgage loan and unfortunately, many people have scores that can hinder the home buying process. The factors that have lowered your score could very well be out of your control and are based on decisions made many years ago. After all, many people get credit cards when they are young without fully understanding their obligations. Even if you have responsibly managed your credit as you have aged, it is still possible to feel the sting of past mistakes. Luckily, there are numerous ways to improve your score. Moreover, there are loan programs specifically designed to help those with less-than-perfect credit reports still become homeowners. In today’s blog, Family Home Loan Texas talks about the ways you can improve your credit score to help you buy a home.
Apply For A Loan
If you are considering applying for a mortgage loan but aren’t sure if your credit score is good enough, go ahead and fill out an application. Even if you do not have an appropriate score, your lender will be able to evaluate your credit report and help you figure out a roadmap, so you can see what is holding you back. This can be immensely valuable because you will have a much clearer idea of what you need to improve. Not only can a lender assist you with crafting a plan of action, but they can also suggest specialized loan programs that you may qualify for. When approaching a decision as big as buying a home, it is crucial to have as much information as possible. Meeting with a lender is a fantastic way to gain this information and understand what you need to work on.
Limit Hard Credit Inquiries
“Hard” credit inquiries occur when you apply for a new line of credit. Common scenarios in which a hard inquiry occurs are applying for a credit card, a car loan, or a mortgage. While having more lines of credit can help improve your score — it can raise your credit utilization ratio — applying for several, especially in a short period of time can be a red flag for lenders. Whether or not it is true in your case, lending institutions interpret lots of credit inquiries as you needing money while having trouble paying off existing debts. With this in mind, don’t shy away from opening up new credit cards. Rather, do so organically, as you need them. Despite the penalty of a hard credit inquiry, responsibly maintaining several lines of credit will benefit you in the long run.
Improve Your Current Report
There are several services out there that can help improve your credit file without you having to do very much. For example, Experian Boot and UltraFICO can raise your score by utilizing your banking history and other ongoing payments that aren’t typically reflected in a credit report. Additionally, if you are renting, see if your management company has a service that will report your monthly payments. Any improvement to your report is worthwhile, so be sure to explore various services available to you.
Handle The Past
While it is never wise to dwell on the past, you should still deal with any previous red flags on your report. It is crucial to resolve delinquent accounts, charge-offs, or anything that has gone to collections. If you have any outstanding medical debt that has gone to collections, you can breathe easier because beginning July 1st, 2022, medical collection debt that you pay off will no longer be included on credit reports. This is a major improvement, as you won’t be penalized anymore if you have paid it off. Similarly, you will have more time to pay medical debt before it appears on your report. Moreover, any medical debt under $500 will no longer show up on reports. While these are seemingly small changes, they will help many individuals improve their scores, making homeownership more attainable.
Stay On Top Of Your Credit
Be sure to utilize free credit-monitoring services. Many credit cards offer this as a complimentary feature, and it is very valuable. Again, knowledge is power, so being able to track your score is helpful. They often give breakdowns of the various elements that contribute to your score and show where you are lacking. When you view your credit score through these services, it is considered a “soft” pull, so your score isn’t penalized.
If you follow these steps and are just generally responsible with how you use credit, your score should improve over time. Even if you do not have an excellent score, many times, if you get to 650, you can utilize various programs that will still provide you with a loan — especially if you are a first-time homebuyer. If you do meet with a lender, they can certainly help you formulate a plan that will get you back on track and into a home.
Contact Us To Learn More
We are always happy to help you come up with a plan that will help you raise your credit enough to secure a home loan. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about your home loan needs, including conventional mortgages and refinancing.