One of the most important items for any home buyer is their credit score. You can have a sizeable down payment and strong income but if your credit scores are poor you may have trouble getting approved. Poor credit doesn’t have to be the end of your home ownership dream. There are things you can do to quickly increase a poor credit score. This starts with knowing where you stand before you start the loan application process. If you are considering buying a home in the foreseeable future you should start to monitor your credit. Once you know where you stand you can begin to take action. If your credit is poor here are some things you can do to quickly turn things around.
Get current. If you are currently late on an account it will have a huge impact on your score. Once you get caught up your scores will rise slightly. Getting current doesn’t erase previous late payments but it will stop the bleeding. Every month you are late will pull your scores lower. The first step to turning your scores around is getting current on any late accounts. Paying the next month on time without paying the past due amount will not do the trick. You need to do whatever you can to get totally caught up and not fall behind again.
Watch your balances. You may be miffed if your scores are not where you thought even though you pay everything on time. The reason for this most likely has to do with your available balances. The credit bureaus like to see that you have at least 30% of your available balance. The closer you are having your accounts maxed out the lower your scores will be. If you are near maxed out you don’t have available credit in the event of an emergency and are a higher credit risk. The riskier you are the lower your scores will be. Paying on time every month is important but so is keeping low balances on your accounts.
Clear out old accounts. One of the reasons that you want to monitor your credit is to know if there are any accounts dragging your scores down. Closing out an old account doesn’t mean it is removed from your credit report. It is possible that this account is doing damage to your credit. The same is the case if there is a small credit card or department store account that you opened years ago and forgot about. This could now be in collection without you knowing. Regardless of the size of the account it will do damage to your credit. Taking care of these accounts may be difficult but they are essential. Take a look at your credit report and see exactly which accounts are still open and active and which need to be removed.
Improving your credit is much easier today than it was years ago. There are many credit repair services available that will help guide you in the process. Your credit is too valuable not to know where you stand at all times.