If you have been struggling with high volumes of debt for a long time it is likely that you are no stranger to bad credit. Along with having bad credit you may also have encountered issues with obtaining a personal loan or a mortgage. That being said, despite having bad credit you may still require a loan, and if you are looking to buy a new home – then a mortgage is definitely a route you are likely to pursue.
Even with bad credit however, it is not impossible to obtain the loans you need. If you are starting to search for a mortgage lender who is willing to offer you a home loan – performing some well-needed credit score maintenance is within your power and as a result you can move into an even better position to secure the loan you need – even a mortgage with more favourable terms.
If you are looking to obtain a mortgage and your credit score could use some shaping-up, here are 3 ways to fix your credit rating in preparation for applying for that well needed home loan.
Credit Fix Tip #1: Closely Monitor your Credit Report
The very first step you can take towards restoring your credit is to get a hold of a copy of your credit report. It isn’t really enough to just know what your credit score is – you also need to review your report very closely in order to make sure there aren’t any discrepancies in information. For starters, you may note some errors that are not representative of your actual transactions. For example, some of these errors could be a result of mistakes credit bureaus have made when adding information to your report.
Another case could be that you could have fallen victim to identity theft and someone else could have been using your account without your knowledge. A third important reason to check your credit report is to identify any credit-damaging transactions you may have made that have lead to a very low credit score. Being aware of these types of specific transactions – which in many cases may reflect late or missed payment behaviour, you can look to see where you have gone wrong and work to improve on them from there on out.
Ultimately, this information can help you turn your payment habits around for the better and by showing potential creditors you can make your payments on time for about 6 months or more, you can move one step closer to getting that home loan.
Credit Fix Tip #2: Apply for a Secured Credit Card
If you are looking for a method of quickly building a positive credit history, then using a secured credit card can be one avenue of getting you there. Essentially, secured credit cards are a safer way of building credit, especially in the event your currently poor credit score won’t allow you to obtain another major credit card type.
With a secured card, you will typically have a lower limit and provide the bank with a deposit that acts as collateral on that loan, in the event you cannot pay it back. Therefore, creditors are more likely to approve individuals with bad credit who would not necessary be approved for what may be seen as a more ‘riskier’ or unsecured credit card.
Therefore, a secured card can be a great way to begin to demonstrate that you can make payments on time and basically be a reliable borrower. With this type of positive credit card management, you can also improve your credit score and make yourself more favourable in the eyes of a mortgage lender.
Credit Fix Tip #3: Lower Your Debt
A final fix-it tip that can also be of help to you as you look to improve your credit score in the hopes of obtaining a mortgage, is to work towards minimizing your overall debt level. The basis beyond this overall idea is – the lower your debt, the better the chance you have to obtain the home loan you need.
While it may be difficult to reduce your debt by a lot at first, if you can at least try to pay some of it down a little bit at time – you can reduce the total load you have been carrying around and as a result, your credit score also has the change to recover. With that being said, there are many debt-reduction plans that can be achieved based on your specific needs and type of debt. Looking into which strategy is the most realistic for you will allow you to improve your credit, in spite of having bad credit. After all, even if you have some debt, at least it shows you are more in control of the debt and not allowing the debt to control you.
When it comes down to it, the main goal of making sure your credit score is in a positive range is to increase your ability to secure future loans – especially such a large loan as a mortgage. If this is a milestone you don’t want to have pass you by, then by taking action now and patching up the holes in your credit, you can make your homeownership dreams a reality – that much sooner.
