So, you’ve decided you want to buy a home in the York County area. There’s just one hitch in your plan. Your credit score isn’t so great. In order to obtain a decent mortgage loan, what can you do to repair the damage?
The actions to take in repairing your credit score will depend on why your rating is poor. Have you maxed out your credit? Have you been delinquent in paying bills on time? Are medical expenses piling up? To discover the answers to these questions, you need to obtain a copy of your credit report. There are three main credit bureaus – Equifax, TransUnion, and Experian – and they’re obliged to give you one free copy of your report per year.
Take each bureau’s report and go over it with a fine-tooth comb. Check every detail and amount for accuracy. If you find something that is in error or misleading, dispute it. There are some instances where a person is dissenting with an insurance company and a hospital over medical coverage. You might have settled with one but are still contending with the other. You can often have the record of this removed by explaining the situation. You can go straight to the individual credit bureaus, or you can search online for an advocacy company. There are often offers of free services from these businesses.
If you find that there is a mistaken report about late payments on bills, dispute this. Be prepared to prove your claims with canceled checks and/or bank statements. Timely payment is important for your record, so take care of this right away.
The amount of your available credit in comparison to what you owe is a big factor in your credit score. Owing more than 50% of available credit doesn’t read so well on paper. If you have a good payment record, calling the bank and upping your credit ceiling should be easy to do. Only do this if you have will power. You don’t want to up your credit just to go on a shopping spree. It’s only good if you don’t use it.
Another way to increase your credit is to activate another credit card account. If you go this route, try to use a company which doesn’t charge an annual fee. It’s true that these companies usually charge a higher rate of interest, but you won’t be carrying a balance on this card, so that won’t matter, right?
If you’ve maxed out several credit accounts, begin paying them down immediately. Use whatever you can afford to pay off the most recent account with high interest first, and close that account. Only then, move to the next one, eliminating them one by one. This may be challenging, especially if you’re trying to make a living and still save for a house. It’s worth it to get those bills off your record.
When you get to the accounts you’ve had the longest, pay them down, but don’t close them. If you close an account you’ve had for over 10 years, it can affect your credit score negatively. If there’s a will power problem, lock the card in a safe, so you won’t be tempted to use it in impulse buying.
Form the habit of scrupulously paying your bills on time. Of course, everyone gets short of money sometimes. Emergencies arise, someone gets sick, or other contingencies can erupt. If you have to delay paying someone, do it wisely. A mortgage company or a credit card company will definitely report a late payment. Sometimes a utility company won’t. Check your report, and if you have to short someone, try to pick a creditor that isn’t listed.
Finally, now that you have a handle on your financial situation, stay in control. Maybe it’s time to stop thinking of “budget” as a bad word and begin thinking of it as a responsible adult word. When you’re in control, you’ll not only sleep better, you’ll be less likely to stress out during your monthly bill payment period.
How’s your credit score? Let us know if you’re interested in listing or buying a home in the York County area, and we’ll be ready to help. The Jim Powers Team of local Realtors® is here for you from start to end. Visit our website to learn more, then contact us or give us a call at 717- 417- 4111.