How To Restore Your Credit Score Quickly

The first thing you need to do when purchasing a home, before you continue your journey, is to get a copy of your credit reports. You need to get a copy of your credit reports from all three credit reporting agencies –  Trans Union, Equifax and Experian.

Credit reports are extremely important in gaining an approval for your new home.  The mortgage companies are more concerned about your recent buying and repayment history than what may have happened years ago. FHA policy requires a minimum credit of 530 to buy a home or refinance. But most lenders prefer a score of 620 or higher. Borrowers with credit score above 580 require a 3.5% down payment. The down payment funds can be the borrowers own funds or a gift from a family member and up to a 6% seller’s concession is allowed. If your credit score is below 580 new FHA changes require a 10% down payment. Negative data typically remain on your credit reports for seven years. 650 or higher was considered excellent by most mortgage lenders. 

If your credit report is not looking to do good, there are many things you can do to restore your score. So that way in six months to a year you can start applying again for a home mortgage and get your approval. 

1.  Check your credit reports for errors.  Again , that is plural so check all three of your credit reports for errors.  If there are mistakes on your credit reports, you will need to start an investigation with the company or the source of the derogatory information.  Contact them in writing and make sure you include all supporting documentation proving the information is in fact an error.

2.  Set up a timely repayment schedule.  If you have any accounts that you have been late in paying, you will need to begin paying all of them on time.  Paying your bills on time for a minimum of six months will go a long way in improving your credit rating.

3.  Collections.  Try to avoid having your accounts turned in to collections.  A collection is the most damaging of all credit issues.  So work out a re-payment plan before your account turns into a collection.  A credit improvement agency may be able to help you get your collections erased; but only if the creditor did not abide by all of the laws of the Fair Credit Reporting Act.   However, this is generally not the case because most creditors know the laws and how to follow them.  So don’t count on this as a quick fix .  Most collection accounts will stay on your credit report for a minimum of seven years.

4.  Keep a low balance on all of your revolving credit accounts.  Try to keep your balances below 50% of your limit.  The lesser the balance the better it looks to  potential creditors.

5.  Do some soul searching.  Try to determine what caused your credit status to get out of control in the first place.  Then do whatever you have to to amend your bad habits – if any.

6.  Get a secured credit card.  Secured credit cards can be very helpful in improving your credit.