How to Repair Your Credit in Just Five Steps

Your credit score is a reflection of your creditworthiness. It affects your ability to get a loan, mortgage, and more. If you have issues with your credit score, it can be fixed in just five steps!

If you have aspirations to own a home in the future, improving your credit score is a worthwhile goal. Those who have excellent credit scores get better home mortgage terms.

Many folks ask what credit score is required to buy a home. What they should be asking is what credit scores are needed to get the best interest rates. The interest rate you receive from a mortgage lender will ultimately determine what you’re actually paying for a property.

There are many questions that should be answered before buying a home. No doubt your finances should be at the tops of the list.

Let’s look at some of the steps you can take to increase your credit score before making any large purchases, such as a home.

Check Your Credit Score First

Before doing anything else, it is important to check and see if your credit score is in the good or bad range. There are a few ways to do this:

  1. Get a free credit report from each of the three major credit bureaus every 12 months. The three major credit bureaus are Experian, Transunion, and Equifax.
  2. Check your credit score on Credit Karma – Credit Karma is also an excellent service that will give you proper financial advice that leads to better credit standing. They will offer advice on what bill to pay first for maximum credit benefits. The best part of Credit Karma is the service is free!
  3. Get a free credit score update from Credit Sesame. Credit Sesame is also another credit improvement company worth looking into.
  4. Check your FICO scores on myFICO. The credit scores here will be more essential to know when you’re ready to purchase a home.
  5. Use a tool like Credit Karma’s Credit Score Simulator to get an idea of where you stand.

Dispute Any Errors Found on Your Credit Report

Once you have received your credit report and scores it will be essential to look over it for any errors.

If you find any errors on your credit report, dispute them. You can do this by contacting each of the three credit bureaus directly.

Pay Your Bills on Time

One of the best things you can do to improve your credit score is to pay your bills on time. Not only will this show that you take responsibility for your financial situation, but it will also help build a good history of debt repayment.

Stay Out of Debt

Avoid getting into debt in the first place if possible. This includes not only debts that you owe money on, but also debts that are related to expensive items like cars and credit cards. If you find yourself struggling to pay off debts, seek help from a financial advisor.

Make Some Small Purchases and Pay Right Away

Making small purchases and paying the bill as soon as possible helps improve your credit standing. Small incremental increases over time will eventually help achieve your ultimate improved credit goal.

Pay Off You Collections but Not Charge Offs 

If you have recent charge offs, in most cases paying them will not increase your credit score however for collection accounts there is few things you can do. If you have non medical collections which you can afford to pay off, you can call the debtor and ask for a “Pay to Delete” to pay it in full, this way your credit score will improve after a next credit score update. Remember that you need to have an agreement in place to guarantee that your collection will be remove from your credit. This will guarantee that your credit will improve and the collection will be gone. 

Monitor Your Credit Score

Keep an eye on your credit score every month to improve or stay the same. This will help you determine if any changes need to be made to your financial strategy.

Get A Secured Loan or Line of Credit

A secured loan or line of credit is a great way to improve your credit score and get some extra cash flow. This type of loan provides security for the lender in the event that you cannot repay the debt.

Getting a secured loan and paying the bill each month shows that you are creditworthy.

Over time it will help you boost your credit score. Consistency pays off when it comes to repairing a low credit score.

A good credit score is a key to getting approved for a loan, so make sure to work on it!

Repair Your Credit History

Understanding how to repair your credit history and taking positive steps forward will be a key factor in improving your financial standing.

The best way to repair your credit history is by paying off your debts. This will help show that you are a responsible borrower and have a good history of repayment.

Not all credit problems are fixable, but you can make significant improvements by addressing the issues. Put together a monthly budget that will go towards all of your debts. Pay off the ones that have the highest interest rates first.

By following these simple steps you can repair your credit score and get on the path to a better financial future! If you want to purchase a home in the near future, you’ll need to get your credit issues squared away.

Maintain an Excellent Credit Standing

Once you have gotten your credit scores increased to a point where they are considered good, you’ll need to work on keeping them there.

There are a few things that you can do to help keep your credit scores high. One is to make sure that you keep up with your payments on time.

If you have any past-due accounts, make sure that you pay them off as quickly as possible. This will help to improve your credit score because it shows that you are a responsible borrower.

Another thing that you can do is to keep your credit utilization low. This means that the amount of debt that you have relative to the amount of available credit is low. If your credit utilization is high, this will negatively impact your score. Paying down the revolving balance each month will help you bring up your scores.

Don’t apply for any new credit cards or other unnecessary loans. Applying for new loans will lower the average age of your accounts which has a negative impact on credit scoring.

Finally, make sure that your borrowing history stays positive.

Final Thoughts

When you have longer-term goals such as buying a home, it will be worth putting in maximum effort to get your credit scores increased.

Having better credit scores leads to better rates and terms the home mortgage lender will grant you.

You can qualify for FHA loan with 500 credit score however you need to put down 10% and most likely go through manual underwriting process. By improving your credit score you can qualify with less downpayent, get a better mortgage rate and have more products to choose from.

The purchase price you buy a home for isn’t really what you’re paying – it’s the cost of the mortgage. By getting a lower interest rate, you can really chop down your overall housing costs the longer you remain in a property.