Improving your credit
Your credit greatly affects the cost of your mortgage. A homeowner with bad credit can expect to pay an extra $50,000 to $130,000 in interest alone for a typical American home. That adds an additional $140-$361 to your monthly payment with a 30 year mortgage. Even more daunting, bad credit can disqualify you from purchasing a home at all. Good credit is essential for you to be approved for a low mortgage payment.

Fortunately, you can improve your credit. By rebuilding and repairing your credit, you can obtain a mortgage at a lower interest rate, potentially saving you thousands of dollars.

Rebuilding your credit
Preparing to buy a home is a great opportunity to rebuild your credit. Good financial management becomes key. Here are some tips to help you rebuild your credit and manage your debts:

• Find out your credit score. You will have a better gauge of the work ahead if you know your FICO score and have examined your credit report .
• Correct any mistakes on your credit report. Credit fraud, identity theft, and honest mistakes can negatively affect your credit report and score. In many cases, you should be able to correct any problems directly with the creditor.
• Pay your bills when they are due. Bill payment is both the most basic aspect of your credit and the most important: payment history makes up 35 percent of your credit score. A good payment history tells potential lenders that you are wise with your budget and prioritize your debts. In other words, it lets them know that you’ll pay them back.
• Reduce your debt. Thirty percent of your credit score is determined by your outstanding debt. Lenders use this information to tell if you can pay them back and still meet your current obligations. Reducing your debt is key to acquiring a large line of credit, such as a mortgage. Pay off as much of your debt as possible and eliminate lines of credit that you don’t need. Begin with those that have the highest interest rates to save as much money as possible.
• Avoid applying for more credit. In addition to the increased debt, applying for more credit allows potential lenders to run an inquiry on your credit. Recent inquiries make up 10 percent of your credit score.
• Be wise when opening new accounts. Because 10 percent of your credit score is affected by the types of credit in use, many people open new lines of credit solely to diversify their credit. In most cases, this actually works against you. Only open accounts that you plan to use. Even then, use discretion.
• Be patient. Rebuilding your credit can take time. Credit history length alone affects 15 percent of your credit score. If you haven’t had credit for long, don’t worry?this should not affect your ability to get a good mortgage rate if you are being responsible with the four other factors. In addition, patience will give you the perspective to hold off on unnecessary purchases, further reducing your overall debt.

Buying a home with poor credit

Most of us long to own a home. We see this idealized place as our shelter in bad times. We love the thought of being able to decorate the entire series of rooms to our unique specifications. Here is our own abode, where we can plant a garden, entertain friends and raise children. Somehow, renting an apartment just isn’t the same. In several months to a year’s time, you can improve your credit report and raise your credit score Unfortunately, for many of us, buying a home is a difficult prospect because of one major drawback – a poor credit history. Bad credit almost always creates complications when trying to purchase something as big as a home.

That three-digit credit score and our credit report can make the difference between being granted a home loan and being rejected out of hand. Why? Because our credit report tells a financial story of us as payers of debt, and it has a long memory. Few people manage to go along forever without making a single financial mistake, and the fact is that many times, those people who pay cash for everything, end up with a lower credit score than those of us who juggle debt.

The worse your credit report is, the harder it will be to acquire a home loan. That is why it is imperative, before you go house shopping and long before you need to move, to study your credit report and clean it up as much as you possibly can. In several months to a year’s time, you can improve your credit report and raise your credit score. Then you will have a much better chance of moving into your own home at a competitive interest rate.

A low credit score means that you will be charged a much higher interest rate when you apply for a home loan. Additionally, you will be required to contribute a much larger down payment of cash. Finally, if your score is very low, you might simply be denied altogether, although virtually every mortgage company now has special programs designed to help those with bad credit get loans for home purchases.

If you have a steady job and a steady income, if you have worked in the same field for two years or more and if you are able to put 10?20 percent down on a home, you will find your chances of acquiring a home loan greatly improved, even if you have a very low credit score. Getting a loan from the bank or credit union where you already do business is sometimes easier. There are other things you can do to improve your chances as well.

After each negative item is removed from your credit report, make sure to insist that the credit bureau mail you a revised, corrected copy. Now you are on the way to owning a home! There is no instant, painless way to repair your credit, even when there are inaccuracies on your report, especially if you are struggling to save money. Plan on exercising patience with this process. The end result is worth the effort. Why your credit score is so important You will often see your credit score referred to as a FICO score. This three-digit number, running anywhere from 300??850, is calculated by complex mathematical equations and is used as a way to determine if you are a good credit risk. Your credit score is determined by taking each of the following four sections of your credit report and weighting them according to a set standard. Figure out where you’re at right now If you are working to improve your credit in order to buy a home, get a copy of your credit reports from all three credit reporting agencies. Why? Because they will not be exactly the same and you need to know what is on every one. Some creditors send information to all three agencies, but some only send reports to one or two. Additionally, when a mortgage lender pulls your report to check your history, they will use the middle score from all three to decide whether or not to qualify you for a loan. If you have not ordered a copy of your credit report in the last year, you are entitled to a free copy from all three bureaus. These will not include your credit score, however. To get that, go to www.myfico.com where you will be charged a small fee. Make yourself comfortable and start assimilating the information on your reports. Check every single item. Verify that everything is correct, including your name, Social Security number, current and previous addresses, list of employers, debts and any public records concerning you.

You will most likely discover errors on your credit report. These errors could be dragging your credit score down. It is not uncommon for people to find errors of such magnitude that their credit score is hundreds of points less than it should be. These errors can be caused by simple mistakes, like transposing a 6 for a 5, but they can also be due to criminal identity theft. Either way, you need to know. Now you must begin the work of cleaning up your credit report as much as you possibly can. This generally requires an exchange of letters. Keep careful notes and copies of everything you do. Send your letters via certified mail. If the credit reporting agency cannot verify the negative information that you are disputing, they must remove it, and they only have thirty days to respond to you. If you don’t have the time to expend this effort, or you feel it is too complicated, you can easily get the aid of Advanced Credit Solutions . We are skilled and experienced people who accomplish this kind of repair work every day, and we know how to make positive things happen.