Why is your Mortgage Credit Score lower than your Free Credit Score? We constantly see…
How to Clean Up Bad Credit and Work Toward Getting Pre-Approved for a Home Loan
Buying a home is one of the biggest financial milestones in life, but bad credit can feel like a roadblock to achieving that goal. The good news? With the right steps, you can improve your credit and put yourself in a position to get pre-approved for a home loan. Here’s a step-by-step guide to help you get there.
1. Check Your Credit Reports
Start by obtaining your credit reports from the three major credit bureaus: Equifax, Experian, and TransUnion. Federal law allows you to access your reports for free once a year at AnnualCreditReport.com.
Review your reports carefully for errors, such as incorrect account balances, duplicate accounts, or accounts that don’t belong to you. Disputing these errors can give your score an instant boost.
2. Dispute Errors
If you spot inaccuracies, dispute them directly with the credit bureaus. Most bureaus allow you to file disputes online:
Please keep in mind that having disputed remarks while trying to obtain a mortgage in not allowed if over $1,000 balance on the disputed lines of credit. You will want to go through the dispute process and have the dispute remarks removed before applying for a mortgage.
3. Pay Down Credit Card Balances
Credit utilization—how much of your available credit you’re using—makes up a significant portion of your credit score. Aim to use no more than 30% of your available credit on each card. Paying down balances strategically can make a big impact quickly.
4. Catch Up on Missed Payments
Payment history is the most important factor in your credit score. If you have any overdue accounts, bring them current as soon as possible. Late payments stay on your report for up to seven years, but their impact decreases over time if you consistently pay on time moving forward.
5. Consider a Credit-Building Tool
If you’re struggling to improve your score, consider tools like:
- Secured Credit Cards: These require a deposit and can help you build positive payment history. Here’s a few options: Click Here
- Credit-Builder Loans: Offered by some banks and credit unions, these loans are designed specifically to help you improve your credit score.
6. Limit New Credit Applications
Each time you apply for credit, it triggers a hard inquiry, which can temporarily lower your score. Avoid opening new accounts unless absolutely necessary during your credit repair process.
7. Work with a Credit Repair Professional
Sometimes, professional help can make a difference. Credit repair companies can assist with disputing errors, negotiating with creditors, and creating a plan to improve your credit. Be sure to research and choose a reputable provider.
Here’s a trusted option:
8. Monitor Your Progress
Sign up for a credit monitoring service to track changes to your score and ensure no new errors appear. Many banks and credit card companies offer free credit score tracking as part of their services.
9. Stay Patient and Persistent
Improving your credit takes time and consistency, but every positive step moves you closer to your goal. Stay on top of payments, reduce debt, and avoid actions that could hurt your score.
Ready to Get Pre-Approved?
Once your credit has improved, you’ll be ready to take the next step toward homeownership! Getting pre-approved for a home loan will show sellers you’re serious and give you a clear picture of your budget.
If you’re ready to explore your options or have questions about the pre-approval process, contact us today. We’re here to guide you every step of the way!
Further Resources:
By taking these steps, you’ll not only improve your credit but also set yourself up for long-term financial success. Here’s to turning your homeownership dreams into reality!
Thanks,
Seth
