Real Estate Purchase 101: Improving Credit

by : Kinan Beck

"If you have credited that's a little on the low end, you might have started looking at bad credit home loans. While that's certainly one way to go, it might not be your best option. Bad credit home loans tend to have high interest rates and big penalties associated with them. If you can improve your credit before buying a home so that you can qualify for a better loan, you should definitely consider doing so. Sure, you want to hurry up and buy your dream home now. But if you have a lower interest rate and pay less for that dream home in the long run, you'll be glad that you waited. And it might surprise you to know that it is relatively easy to improve your credit so that you can buy the home you want without the hassles that come with a bad credit home loan.

The first thing that you need to do to improve your credit is to get a copy of your credit report. If you have recently applied for a loan and been denied, you can contact the company that did your credit check to get a free copy of your credit report. Otherwise, you can order a free credit report. Just be sure to read the fine print about any trial plans that you'll have to cancel to avoid fees for this. After you get your credit report, go through it with a fine tooth comb. Look at each part of the report and make sure that it's all correct. Then look at the things that are causing you to have bad credit because this is what you'll fix to improve your credit so that you can buy a home.

Some of the things that might be causing you to have bad credit include:

Ã?â‚?? Errors on your credit report. If there are errors on your credit report, get them taken care of and cleared to improve your credit.
Ã?â‚?? High debt to income ratio. If you have a large debt and a low amount of income, you're a credit risk. Consider increasing your income with a part-time job. And work on lowering that debt. Chipping away at it a little at a time is better than not getting rid of it at all.
Ã?â‚?? Late payments. If you've made late payments, you need to repair that by establishing a good history of paying on time. Figure out why you're late. Do you forget to pay your bills? You need to get organized. Do your paychecks fall just after the due dates on bills? Many lenders will let you change the due date of your accounts to accommodate this.
Ã?â‚?? Your credit cards are near their limits. You might want to get a private loan from a family member to help bring those limits down so that you look better on paper.

After you've gotten started on repairing your bad credit, you'll need to establish good credit to qualify for a good home loan. You should use credit cards every month but pay them off in full before the due date to start establishing good credit. By maintaining some basic organization and discipline, you can repair your credit in just a few months. Then, you can start looking for your dream home. Make sure you're looking in your budget so that you can get a good home loan that you'll actually be able to afford."