How Can I Improve My Credit To Buy A Home?

How can I improve my credit to buy a home? Using your credit card sparingly, and paying the full bill amount will help improve your credit score. The most important thing that all homeowners should know...

The most important thing that all homeowners should know is to NEVER pay for a "Credit Repair" service. Many of these services are nothing more than dispute mills, charging customers hundreds and ever thousands of dollars to do nothing more than dispute derogatory credit accounts over and over. What many people do not realize is that they can usually dispute items on their credit reports themselves-for free. To make matters worse, some of these agencies actually suggest that their clients break the law by getting new social security or tax ID numbers in order to start a new credit file. These types of scams can cost you a great deal of money, and can even land you in jail so it is best to stay away from them.

The majority of consumers can repair their own credit, provided they know which steps to take. The first step is to order a copy of your credit report. The three major credit-reporting bureaus are Experian, Equifax and TransUnion. It is important that you obtain all three of these reports because there may be information that is on one bureau's report that is not on another. In addition, mortgage lenders will use the information from all three of these agencies to determine your credit risk. New regulations require all three Credit Reporting Bureaus to provide their customers with at least one free credit report per year, so most people can now get a credit report free of charge. You are also entitled to a free credit report if you have been denied credit in the past 60 days or have been a victim of identity theft.

When you receive your credit report, make sure you examine all of the information carefully and check for any inaccuracies. If you find any incorrect information, accounts that do not belong to you or evidence of fraud, dispute these items with the bureau immediately. The bureau will then investigate and by law, have to respond within 30 days to your dispute. If the information is proven to be inaccurate, the bureau is then required by law to remove the item from your credit report.

After you have gotten rid of the incorrect items, you will now need to focus on the accounts that actually do belong to you. If you have any past due bills or collection items, it is important that you pay these off and get current as soon as possible. Each payoff will help improve your credit score, and lenders like to see people make an effort to pay off their bills, even if they have lapsed for a while. Once you get caught up, it is also important that you begin paying your bills on time, as 35 percent of your credit score is based on the timeliness of your payments.

It is also important that you only use and apply for credit when you need it. Excessive charging, maxing out your cards and applying for multiple accounts within a short period of time will lower your score dramatically. Richard Fryer, a real estate school president with 30 years of experience in the field, says that many people make the mistake of letting their balances on their credit cards get too high, and their credit rating suffers as a result. "If you don't have to carry a balance, pay those credit cards at the end of every month. If you have to carry a balance you need to pay more than the minimum payment and you need to get it to where you don't have huge balances on all of your credit cards. That's the problem with a lot of people who are in a situation where they want to buy a house. They have got a bunch of credit cards...and they run them up. Their income is not sufficient enough to overcome that in a mortgage payment and they can't qualify for mortgage loans," he says.

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