Are you getting ready to buy your own home after years of paying rent? You may need to increase your credit score. People with higher credit scores have an easier time being approved for a loan and getting the best interest rates. But if you do not have great credit, you may want to consider the below ways to raise your score quickly before applying for a mortgage.
Buying a House Remains Attractive in 2024, as Mortgage Companies are Easing Credit Standards and Home Loan Rates Remain Competitive.
Some people using the below methods have been able to increase their score by up to 100 points in 30 days. While this may not be possible for everyone, it is certainly possible to increase your score in the double digits for most people. Getting a first time loan with poor credit is an option, but it makes sense to work on improving your credit scores prior to making an offer on a home.
Take Advantage of these Tips to Raise Your Credit Scores Before Buying a Home.
#1 Get a Copy of Your Credit Report at No Cost
The most important thing to do is to read a current copy of your credit report. You can get one free credit report per year at www.annualcreditreport.com. That entitles you to a credit report from one of the major credit bureaus, but you are best off by paying to get a current report from all three. Your credit score can vary dramatically from one bureau to another.
#2 Pinpoint Negative Accounts Being Reported
Now that you have a copy of your credit report, go over it and highlight any accounts with a late payment noted. You also should check for how many credit inquiries you have had for the last year. Also check that your name, address and phone number are right. FHA and Fannie Mae HomePath loans allow borrowers to have credit problems in some cases, but if you can clear up the negative remarks on your credit report, then you will have a clearer path to getting an affordable home loan with out breaking the bank for the down-payment requirement.
#3 Pay Down Revolving Debt
The biggest thing you can do to increase your score fast is to pay down credit card debt. If you have balances that are near your credit limit, this is hurting your score by 50 points or more. It is especially important to keep these ratios under 15%. Your credit utilization rate has a 30% impact on your total score. Only your payment history is more important. If you can, pay down your balances to zero or close to it. This will cause your credit score to pop next month.
Failing to make a payment or experiencing a delay is more common than you might realize. When life becomes exceptionally hectic, it’s easy for your credit card or loan payment deadline to slip your mind. That’s why professionals suggest utilizing autopay or establishing automatic transfers from your bank account to cover your bills. This method eliminates the need to remember making payments manually, thereby decreasing the risk of missing a payment that could negatively impact your credit score.
#4 Get a Credit Card
If you do not have credit cards, it will help you to increase your score by having one. Getting a credit card with bad credit is hard, but you may be able to find some at www.creditcards.com.
You also can get a secured credit card. You will pay a deposit equal to whatever the credit limit is, and then use it just like you would a credit card. As you use it regularly, it will be reported to the credit bureaus. If after six to 12 months you use it properly and pay on time, it could be converted to an unsecured credit card that also will help your score.
#5 Call Collection Agencies
Do you have any collection bills with small balances? If they are on your credit report, they are hurting your score. Call the collection agency and tell them you want to do a pay for delete. This means you pay the balance owed and they delete the account from your credit profile. It is very important to make sure you write down the name of the person you talk to. You also must get a pay for delete letter in writing from the collection agency. This is the proof that they promised to delete the negative information from your credit report. If they do this, it will raise your score.
#6 Don’t Pay If The Negative Account Is Not Deleted
It may sound wrong to not pay a debt on purpose, but if the collection agency will not remove the negative mark from your credit report, you should not pay the balance. The company must give you a pay for delete letter and prove that the account has been cleared from your credit.
If the creditor says they will report it as paid but cannot take it off your credit report, do not pay it. Your credit score will not be improved. Remember, it does not help you to have a collection account on your credit with a zero balance. That account must be wiped from your credit report to raise your score.
#7 Dispute Negative Information On Your Report
Any negative information on your credit report should be disputed. If the creditor is unable to verify the negative mark is accurate, they will delete it. It is possible to have 10 or even 15 accounts deleted from a credit report by just filing a dispute. The more of the negative accounts you can have removed, the more it helps your score.
You can work with individual creditors to remove late payment information. Sometimes, if you just ask them nicely to remove the negative mark, they may do it. If you try these above methods to raise your credit score, you may be able to raise it in a big way before you apply for a home loan.
There is positive development on the horizon for renters becoming first time home buyers Mortgage lenders are anticipated to adopt new credit scoring models soon, as mentioned by Joanne Gaskin, the Vice President for Scores and Analytics at FICO, a data analytics company responsible for generating credit scores. This change has the potential to benefit a broader range of individuals, particularly those from traditionally marginalized communities, according to the Urban Institute. However, the implementation is not expected until late 2025.