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There is no doubt that the regulations on home mortgage lending has changed when it comes to who can or cannot receive a mortgage to buy a home. Many individuals have the American dream of home ownership and want to buy a home but the obstacle between them and obtaining a mortgage is their low credit score. Here are some tips for making improvements to your credit score:
1. The first tip concerning your credit score is simple, look at your credit score and report! You are entitled to one free credit report per year from AnnualCreditReport.com. Once you have your credit report, analyze it to see if it's accurate. Check everything including personal information, inquiries and debts to ensure there are no inaccuracies.
2. Dispute any inaccuracies on your credit report. Alert the bureaus and ask them to remove this wrong information or correct it. If there are collections on your credit report that are not accurate you will need to do more than dispute the debt, you will need to request that proper documentation from the collector be sent to the bureaus. If the collector cannot provide proper documentation to the bureaus that prove you owe the debt and the exact debt amount stated then they must remove the claim from your report altogether. **TIP: Many debt buyers cannot produce proper documentation. If someone has bought one of your old debts dispute it and request for them to provide documentation, it is very likely that they will not be able to produce it.
3. Do not dispute accurate collections on your credit report that can be authenticated by your creditors through proper documentation. Many people go through their credit reports and dispute all negative items including the accurate items. This can actually make matters worse when it comes to your credit score. The reason being is that some debts are old and inactive. When you dispute the debt and it is proven to be an accurate debt by the collector your credit report will actually update the collection making it an active debt on your credit report.
4. Have a reputable lender pull your credit for review before paying off any old debts. Again paying off old and inactive debts can actually hurt your credit score in some cases because the account has been reactivated as a current debt. All liens and judgments recorded on your credit report will need to be paid prior to a home purchase but allow your lender to advise you as to how and when to pay those debts.
5. Make your payments on time. 30, 60, 90... day late payment hits can really take their toll on your credit score. Be sure that you always make your payments on time so that no late payments are recorded onto your credit report.
6. Pay down your high balance credit cards. This simple step can really make a difference with your credit score. For instance if you have a $1000 Visa card and you have it maxed out with purchases this will negatively affect your score. However if you have a low balance of let's say $150 or less on this card it will actually help your score in most cases. This shows a positive line of "available credit." There is a catch however, don't pay down to a zero balance and allow the card to go inactive or close the account as this also will affect your score negatively. So the key is to keep an active but LOW balance on all open lines of credit.
7. Do not allow too many creditors to pull your credit. Too many inquires on your credit report can have an adverse affect. Only allow your credit to be pulled when absolutely necessary. **TIP: some sales companies will actually "shop" your score. Be sure that when you do give your social security number to someone they will only pull your credit once and not shop it out to multiple companies that are each pulling your credit.
8. Check with the Federal Trade Commission if there is any illegal activity on your credit report. Identity theft is a huge deal these days. If you have this problem check with authorities for the steps to take and get the issues resolved as quickly as you can.
Your credit score is "you" in the free market world of buying and selling with someone else's money. Be sure that you manage and take good care of your credit once it's been restored.
Need help with finding a reputable home mortgage lender in Georgia? I will be happy to send to you a list of loan originators that I have had successfully closed transactions with. Contact me anytime.
Amie Bozeman, Atlanta Real Estate Pro