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Understanding Your Credit Report – Tips to Improve Bad Credit Score

understand credit reports tips to improve credit score

 

There are many common mistakes a first time home buyer makes when buying a home. Many have no idea of the important role of having good credit score. Some have not established any credit at all.  Don’t spend months looking for a home to purchase only to be disappointed your loan officer tries to  pre-approved you for a mortgage and you don’t qualify. Start your home buying process with understanding your credit report and working to improve a bad credit score.

Do you have a bad credit score or no record of credit at all?

There a many questions surrounding your credit that you must ask yourself.student loan debt - bad credit

1. Have you even established any credit at all through, school loans, personal loans or credit cards?

2. Do you have good credit? Have you consistently paid your rent and utility bills on time? Do you have outstanding medical bills that are overdue?

3. In the last 2 years have you been late on any bills?

4. Do you have good reason for any late payments?

If not, a good mortgage broker can guide you in this process to begin establishing your credit. If you need to clean up your credit seek help from a professional credit counselor.

Your first line of business is to see a mortgage professional and have them run your credit report. There are 3 credit bureaus in the United States are Experian, Equifax, and TransUnion. People with good credit scores tend to get lower interest rates when applying for a mortgage.

How to Understand Your Credit Report

What do the credit score numbers mean?

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Credit scores under 600 make it difficult to buyers to obtain financing. The risk to the lender is too great.

Credit scores of 720 and above are considered a good risk and shows they pay their bills on time. 850 is the highest they go.

Your credit report will show basic information about where you work, and how long you have been in your job or field of business.

Sometimes your income is provided unless your employer would not give income information to the credit bureau.

 

 

 

 

Here is a brief description of terms under “Trade Information” to understand your credit score:

Creditor Name

The party that loaned the money or allowed you to charge a purchase. In this case the credit report list is many different creditors including mortgages, bank loans, credit cards, and department stores.

Account Type

The type of deb. Revolving debt charge card debts (REV) such as Visa or Mastercard, department store cards. “INST” means installment debts, (things you pay each month) such as student loans, car loans, or furniture purchases. Lenders check current loan balance and your payment history. You may be required to pay these off before obtaining a mortgage in order to qualify for a mortgage. “MTG”

High Credit

The available limit on revolving credit or the total amount borrowed from each creditor.

Date Reported

The date the creditor provided the information to the Credit Bureau.

Date Opened

The date you opened an account or began to owe a debt to each creditor.

Balance Owning

The amount left to be paid on the loan or charge card.

Times Past Due

The number of times that Jeff has made payments late broken down into 30,60, or 90 days.

Current Status

“CURR” means you have paid your accounts according to your agreement with the lender. If you have a poor payment history it would say “SLOW”

Collection Information

“CHGOFF” means that your account was sent to collection agency to collect your debt. This can prevent you from qualifying for a mortgage.

Inquires

No inquires during the past 90 days means that nobody has requested to see you report in the last 3 months.

How to Correct Bad Credit and Increase your Credit Score

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So you have no credit history and your credit report shows little or no information. Now what?
Use your payment history on utilities and rent. You can provide cancelled checks to show your strong payment history.

What if you have a credit issue because of an unusual situation.

Let’s say you missed some mortgage payment because you were hospitalized. Write a letter of explanation. Your lender may be able to overlook a credit problem if you can give good reason for neglecting your payment.

If you normally pay your bills on time but failed to pay one because of an unusual or temporary situation, write a letter that explains in detail what your payment was late. The letter will become part of your loan application and help in improving your credit score.

Are you constantly struggling to make ends meet and pay your bills?

You should seek professional help. Consumer Credit Counseling Services, a nationwide non-profit group, provides excellent credit counseling free of for a reasonable fee. There are also state organizations that provide similar services to help you regain control of your finances.

It is also important to let your creditors know if you’re having problem making payments. In many cases, creditors will try to help you think of ways to relieve your situation.

Remember, creditors don’t want to lose money, and they want to help you pay them back.

So you have passed the credit test and made an offer on a home and you are ready to meet with a mortgage broker to obtain a mortgage. Gather all the documents you need to apply for a mortgage.

Here are some of the documents that are needed for a mortgage application:

  • 2 most recent years W’2
  • Check for appraisal, credit report, & rate lock
  • 2 most recent months bank statements
  • 30 days most recent pay-stubs
  • Purchase and Sale Agreement
  • Check for appraisal, credit report & rate lock
  • Original Certificate of Eligibility (VA)
  • Full tax returns (self employed)
  • Divorce Decree (if applicable)
  • Drivers license

10 Credit Score Tips you need to know when buying a home!

 

  1. Having a budget in place is essential to your success.tips-to-improve-credit-report
  2. Plan your purchases to use cash instead of credit. If necessary, postpone major purchases until you have saved the money you need.
  3. Avoid making large purchase before you buy a house. This is added debt that will affect your mortgage qualifications or how much home you can afford.
  4. Know how much you owe on all of your accounts. Uncertainty about your debts is dangerous.
  5. Contact creditors immediately if you have a problem.
  6.  Do not change jobs until after you close on your new home.
  7. Check your credit report and credit score and dispute any errors.
  8. Save money on a regular basis so that you have funds to fall back on in case of a financial emergency.
  9. When shopping, resist the urge to save 20% on your purchase if you open a store credit card. Don’t open and close credit card accounts. This will hurt your credit score!
  10. Try to put some money down when purchasing. Lenders like to see that you can afford to contribute.

 


Other contributions by:

12 Tips to Improve Your Credit Score To Buy a Home via Kyle Hiscock

Check Your Credit Score Before Buying a Home via Bill Gassett.

10 Biggest Mortgage Mistakes First Time Buyers Make via Xavier De Buck

The Power of the Pre-approval Letter via Kevin Vitali

Improve Your Credit Score via Luke Skar

Mortgage Information provided by Ann Kramer

 

how to budget when buying a new home, Realtor Simsbury VT, Real Estate Simsbury, cost of buying a home, mortgage calculatorLEARN HOW TO BUDGET WHEN BUYING A HOME HERE!



Real Estate information was provided by Eileen Anderson, recognized leader in her field. If you are looking to hire a top REALTOR®, Eileen can be reached via email at Eileen@eileenandersonrealtor.com or by phone at 860-966-2112.

I am licensed for residential real estate sales in the state of Connecticut including but not limited to the following CT towns: Avon, Bloomfield, Burlington, Barkhamsted, Bristol, Canton, Colebrook, Granby, East Granby, Hartland, Hartford, Suffield, Windsor, New Hartford, North Granby, Farmington, Newington, Litchfield, Simsbury, Suffield, Old Lyme and West Hartford, CT.

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