How the Credit Repair Process Can Help You Purchase a Home

5.51 million. That’s the total number of existing homes sold in 2017.

Newly built home sales, on the other hand, totaled to 612,000.

And did you know that more than a third of all buyers were first-timers in the residential real estate market?

This goes to show that despite the rising prices of houses all over the United States, people still want to purchase a home. It’s part of the American dream after all.

But what if you have bad credit?

Worry not, as you don’t have to give up hope yet. With the right credit repair strategies, you can still fulfill that dream of yours to become a homeowner.

And we’re here to tell you just how you can repair credit to buy a home. So, make sure you read this from start to finish.

Why You Need to Repair Your Credit in the First Place

Before we get into the nitty-gritty of fixing credit to buy a home, you should start with understanding consumer credit, credit score, and why there’s a need to repair it in the first place.

At its core, consumer credit refers to a debt someone takes on whenever he/she buys a good or service. You may have heard of the term “consumer debt.” This is the same thing.

It includes anything you purchase using your credit card, a line of credit, or a loan. That credit card you use for the majority of your shopping activities? That’s one type of consumer credit and is the most common form.

Your credit score, on the other hand, basically measures your creditworthiness. In other words, it’s how lenders perceive you and determine whether to let you “borrow” money from them. It’s a three-digit number that indicates how financially trustworthy you are.

Like with academic scores, the higher your credit score, the better. In most cases, good credit scores mean that consumers pay their loans on time. There are, however, many other factors that influence it, including the credit history length, types of credit, and total debt owed.

So, what happens that lead to people having bad or poor credit scores?

One of the most common reasons is for failing to make loan payments on or before their due dates. Another is for having only one type of credit. And there’s also the possibility of errors on credit reports.

It’s dangerous to think that the last won’t happen to you. As many as one in every five consumers may have an error on their credit report.

Remember: Your credit score can have a drastic impact on your life. After all, it’s a primary consideration lenders look at when deciding whether to qualify you for a loan. That bad credit you have may be the only thing getting in your way of finally becoming a homeowner.

Starting the Credit Repair Process

There are a number of ways on how to fix your credit score. Note, however, that repairing credit takes time and diligence. It’s totally doable, but it’s not an overnight fix.

First things first: Know what your credit score is. Just to give you an idea, the nationwide average last year reached an impressive 700. This signals a rise in consumers’ credit scores, although this still greatly varies based on age.

Also, some good news for you: Last year, over 50% of consumers in the country scored above 700. Only 20 more points and the score will already classify as excellent. This said, you should know that what seems to be an increase of only a few points can already make a difference.

Ensuring Your Credit Report is Spotless

To know exactly where your credit score stands, it’s best you get a copy of your credit report. Aside from letting you know what exactly your score is, this also lets you spot any possible errors in the report.

Remember: You won’t know that you’re part of the 20% of the consumer population potentially having errors on their reports unless you get an official report copy. So, once you have this, inspect it from top to bottom. And in the event you discover any mistakes, report it right away.

Every Payment Counts

The last thing you want is to take out a mortgage to fund your home purchase but have serious difficulties paying it. Pushing through a mortgage application despite your bad credit almost always mean higher mortgage rates. And the higher this is, the greater your monthly mortgage payments are.

In other words, you’d have these higher mortgage payments on top of your outstanding loans. This can be quite difficult to make good on, which then increases your risk of missing payment due dates. And whenever you fail to pay on time, your credit score once again takes a hit.

And the vicious cycle won’t end.

So, rather than taking on an even bigger debt, it’s best you pay off your current ones first. Every payment, no matter how small (minimum payment due), helps you lessen your debts. This doesn’t just reduce what you have to pay for every month; it also helps you improve your credit score.

From here, you have better chances of securing funding for your home purchase. And of course, greater odds of getting more reasonable mortgage rates.

Settle Payment Dues As Soon As Possible

Even the most prudent and responsible consumer can still forget about due dates. The thing about missing payments is that they automatically raise red flags for lenders. They also show up on credit reports, which means that lenders you’d want to work with in the future will see them.

One of the best strategies to never let a payment due go unpaid again before its due date is to set up reminders. Or if possible, set up payment schedules. This way, even if you forget about them in the hustle and bustle of your hectic work schedule, you’ll receive reminders or have them paid automatically.

Start Repairing Your Credit Now

As early as now, you’d want to begin the credit repair process. Again, because it takes time to fix a credit score. And of course, because you want to finally make that transition from being a renter to a homeowner as soon as possible.

Want more help with your credit score? Head to our website now for more tips and tricks like this!