If you’re interested in purchasing a new home, you will need to give evidence of your income, produce a down payment, then find a lender and, perhaps most daunting, pass a credit check. Before you shop around for a mortgage, then you can attempt to repair your damaged credit. Doing this guarantees that you provide your lender with the mortgage application possible.
Your credit rating not only decides whether mortgage lenders will offer you a reasonable interest rate on your new home loan, but can also influence whether lenders accept your mortgage application at all. Inadequate credit signifies that you can’t be trusted to pay your debts in a timely way. If your credit is too damaged, the lender may decide that you’re just too high in a lending risk and deny that your mortgage application. Therefore, when you have damaged credit, it’s imperative that you take action to improve your credit before applying for a mortgage.
Credit repair does not refer to eliminating accurate negative information from your credit record. The only remedy for accurate negative notations is time. A poll by the U.S. Public Interest Research Group, however, demonstrates that more than 75% of all credit reports contain mistakes. By eliminating damaging and erroneous information within your credit documents, you can”repair” your credit and improve your score before applying for a home mortgage.
The Fair Credit Reporting Act allows you access to free yearly copies of your credit reports in addition to granting you the right to dispute incorrect information you discover within any of your own reports. Upon receiving your disputes, the credit reporting agencies are legally required to research claims. In addition you have the right to dispute incorrect account data with the creditor reporting the mistakes into the credit reporting agencies. In either situation, if the creditor reporting the error fails to repair it, you might file a lawsuit to ensure you keep your national right to an accurate credit report.
One of the primary characteristics that determines your credit rating is whether you’ve made timely payments for lenders in the past. Only a few late payment notations on your credit file can considerably drop your credit score–and result in you paying a higher interest rate on your future mortgage. In situations such as these, a goodwill letter might help. Goodwill letters attempt to convince your creditors to eliminate late payments from the record for a gesture of simple goodwill. Not all companies will comply, however if you’re a longstanding customer or have very few late payments on record, you might locate your present creditors eager to amend your accounts.
Credit repair companies don’t have the authority to engage in almost any credit repair activity that you can not also do on your own. As you might feel more secure using a credit repair firm, look out for scams. According to the Federal Trade Commission, a number of those illegal credit repair tactics some credit repair firms use, like instructing you to build a new credit identity, can get you to legal trouble.