TIPS TO IMPROVE YOUR CREDIT SCORE AND GET A MORTGAGE
WITH BAD CREDIT
By Jessica Hudson | January 1, 2023
Check your credit report
Pull your credit report to determine where you are and how much damage control you need to do. Even if you think you have great credit, it is always a good idea to periodically check your score/report. You do not want to have an unwelcome surprise when it comes time to apply for a loan.
Clear up errors
If you find anything that seems amiss on your report, contact the company involved as soon as possible. This includes unpaid debts reporting on your credit that are over 7 years old. If you have an unpaid debt that is 7 years or older, you will need to dispute it with each credit agency to remove it from your report. Debt-collection companies will often sell your debt and it can make the debt look newer than it actually is and thus keep reporting to your credit.
Pay bills and outstanding balances
Now that you know your credit score, you can start working to make it better! This might go without saying, but one of the best ways to earn a great credit score is to always pay your bills on time. Missing one bill can lower your credit score by as much as 100 points. To begin your credit recovery journey, make sure you pay all of your late payments and do not miss another bill payment. While paying those outstanding debts isn’t going to raise your credit score, it will keep it from getting any worse.
Lower credit utilization
Now that you’re paid up on all your bills, it’s time to give your credit score a serious boost. One of the biggest factors that impacts your credit score is your credit utilization. Credit utilization basically refers to how much of your credit card limit you use. Typically, you should only use 20%-30% of your total limit. If you have little available credit, you can open up a balance transfer credit card to get your overall utilization down. If your credit score is really hurting, you may need to look at a secured credit card to get your utilization down. Make sure you carefully plan your applications for credit though. Avoid applications that might be rejected and, generally, you should leave six months between credit applications. Too many hard inquiries on your credit will negatively affect your score and looks unfavorable to lenders.
Register to vote
When you register to vote, your electoral details are recorded on your report. This data helps lenders confirm your name and address and track your history. Just being on the electoral roll can give your credit score a boost.
Get credit for making utility, cell phone and rental payments
If you’ve been making utility, cell phone, and/or rental payments on time, there is a way for you to improve your credit score by factoring in those payments. Experian Boost is a program that allows Experian to verify your cell phone and utility payment history. Rental Exchange is another program that collects your payments and passes that information to Experian.
Prioritize mortgage payments
Lenders may be willing to overlook a missed car payment or a late credit card payment, but many loan programs do not allow a borrower to have missed mortgage payments on their record. If you think you are in danger of missing your mortgage payment, contact your lender as soon as possible to discuss your options.
Evaluate your co-borrower’s situation
In community property states, some loan programs such as FHA and VA will take your spouse’s credit into consideration even if they are not on the loan (whether or not you need their income to qualify). If you plan to use one of these popular loan programs in the future, make sure you evaluate your partner’s report as well as your own.
Alternative loan programs
If you have done all you can with your credit in the time available and it is still not up to par, there are many loan programs available for those with low credit scores. There are also loan programs that allow for little to no seasoning on bankruptcies, etc. The moral of the story is even if you think your credit score or derogatory event will not allow you to get a loan, it is worth contacting your lender to find out for sure.