Good credit is essential if you want to purchase real estate. In order to obtain financing, potential home owners will have to show that they can repay the loan. When buying real estate, one should have a good credit score to get the best interest rates and terms. With a good credit score, you can get the best deal available for the property you want to buy. If you have a low score, however, you may be unable to obtain financing, or at least the terms you want for your loan may not be favorable. If this occurs, then you should consider ways to fix your credit before attempting to buy a house.
Before you start fixing your credit, make sure you know what type of credit score you have. You will find three types of credit reports, Fair Isaac, Equifax, and TransUnion. Your FICO score is the most widely used by lenders to determine your risk. It is based on your payment history, but it also includes inquiries, collections, and past debt.
A copy of your FICO is offered at each credit reporting agency. To obtain a free copy, you can contact the three agencies and request a report. Some online sites may offer a free report, but the credit bureau must provide you with hard copy. It may take up to a week to get your report from all bureaus. The good news is that if you have a lot of outstanding credit, the time it takes to receive your report may be longer.
Fixing your credit before you try to buy a house is as easy as paying off some old debts. This will show future lenders that you are serious about repairing your credit score. Be prepared to list current debts on your credit report. This may increase your credit score, but may not be a good thing if creditors already see signs of your financial problems. You may still get denied a loan or an apartment. So make sure to list your debt payments on a temporary loan or other form first.
If you have a good score, try to start adding positive accounts to your credit file. Paying bills on time, making minimum payments on other loans, and not maxing out any other accounts will improve your score. Adding new lines of credit is good too, but don’t add too many in a short period of time.
Check your credit report for errors and dispute any inaccurate information. This will help you lower your score, which will help you qualify for better terms when you buy a home. Dispute an error on your credit report immediately. You can dispute an item that may have been reported improperly via mail, phone call, or in person by writing a letter to the credit agency. Credit agencies are required to investigate any inaccuracies in your report within a month of the item being reported.
Now that you have your history, it’s time to find a lender willing to work with you. Many banks and credit unions will work with you when you have a good credit score to buy a house. Check with your friends and family and do some research online. Find out what kind of deals they are offering and compare the interest rates. Make sure to check with the bank that holds your mortgage to see if there are any special programs that might be available to you based on your score.
Once you have found a good credit score to buy a house, keep it up. Pay your bills on time, keep your balances low on other cards, and stay out of debt. You can buy a house at a lower price and a lower interest rate than you would get elsewhere. It just takes a little extra work and patience to qualify for the mortgage company. Good luck!