Home prices and interest rates are so low that many people would buy if they could. The revamped regulations in the lending industry have made getting a mortgage more challenging than ever. The bright side of the new regulations is that it is much harder to qualify for something that you cannot really afford. The down side is that you have much stricter guidelines to follow in order to be approved for a mortgage. One of the things that have changed in lending is that credit scores must now be significantly higher to get a mortgage loan.
For anyone that may have been thinking about buying, checking your credit report is the best place to start. Everyone is entitled to receive a copy of their credit report for free once each year from each of the three major credit bureaus. Whether or not you are looking to buy a home, keeping tabs on the activity recorded on your credit reports is important. Your credit score affects more than just your ability to qualify for a loan, negatively reported accounts on your credit report can keep you from renting a home, getting insurance, or even getting a job.
As complicated as a credit report might seem, raising the ever-important credit score is not all that difficult. First, order copies of your credit reports and review them carefully. Any items that you feel are in error or do not belong to you should be disputed through the credit bureaus. They will investigate and determine if the items in question belong to you. When the investigation is complete, the credit bureaus will provide updated copies of the credit reports for you. Review them again and repeat the process if necessary until you are certain that all of the information on your credit report is accurate. Any remaining negative accounts on your credit report should be contacted promptly and balances negotiated to be paid, and most importantly marked as paid on your credit report.
The key to a good credit score is more than just removing negative accounts from your report, you must show a history of responsible use to earn good credit. For people with no credit, this means getting a credit card, and if you have had past credit issues it may require a deposit. For those individuals who have open credit card accounts and other loans this means showing a history of paying on time and not owing too much. You can make all your payments on time and still have a bad credit score because you have a high balance on your credit card statement or too much debt. For the credit cards to improve your score, you must limit the balance you carry to 10% of the credit limit.
With negative items cleared and a credit card carrying a low balance that is paid on time, you can improve your credit rating significantly and qualify for a mortgage. With just a few simple steps, you can raise your credit score and jump into the buyers market.
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About Geoff Thompson — Geoff Thompson is an Owner and Founding Partner of Express Schools, LLC. which operates online education providers Real Estate Express, Insurance License Express and License Tutor. Follow him on Twitter.