If your median credit score is below 600, it could cost you anywhere from $100 to $1,000 or more per month to afford a nice home. Or worse case scenario, if your score is very low, you may not qualify at all or would have to put down a very large (20% to 50%) down payment.
When considering purchasing your first home or investment property, or additional properties, having a good credit score, will greatly increase your chances of getting a good loan with the lowest possible interest rate, resulting in a lower payment. Getting a mortgage usually depends on a network of credit reporting agencies that either share information with, or are owned by, three major credit bueraus.
It's a good idea to check your credit report to know where you stand before you get too far in the home buying process. This way you can avoid surprises or take steps to improve your credit before applying for a loan. Getting copies of your credit report is easy. You can request a copy from each of the 3 major national credit bureaus; Equifax, Experian and TransUnion. The average cost is around $10, however this is subject to change.
If you applied for a loan and were turned down, you are entitled to a free copy of your credit report within 30 days of being turned down. Your request is normally in writing,or online,(occassionally by phone) and should include a copy of your denial. You may also get a free copy of your credit report if you are unemployed, planning on applying for jobs within 60 days, receive public welfare assistance or believe the credit file has fradulant mistakes.
When you get a copy of your credit report, make sure it has your correct name, address, social security and places of employment. Verify your open and closed accounts along with their credit limits, balances, and timely payments. Also make sure that nothing (especially negative info) is on the report longer than the law allows.
- Bankruptcies must be taken off after 10 years
- Suites and judgements must be dropped afer 7 years
- Tax liens must be dropped 7 years after it's paid in full
- Delinquent accounts and car repossesions can be up to 7 years
- Inquiries should be no longer than 1 to 3 years
Any error that you find must be investigated by the credit bureau and with the creditor who supplied the data. The bureau will remove any errors that a creditor admits are there. If you disagree with the findings you can file a short statement in your record giving your side of the story. Future reports to creditors must include this statement or a summary of it.
Be careful about applying for additional credit when you are trying to purchase a home. It's advisable to hold off on any major purchase such as a car, if you know you will be purchasing a home, until AFTER you purchase the home.
You may also try some of the specialized CREDIT REPAIR services that offer a guarantee of improving your score. These services normally work by challanging all (negative) information on your credit. If the credit bureaus are not able to confirm the "negative" information within 30 days, they must remove it from your account, resulting in a higher credit score for you. These services charge an average of $450 and it takes about 3 months for them to improve your credit. If you are thinking that $450 might be too much to pay, think of the extra $100 or more each month (and $1,000s each year) that you will be paying if you don't take advantage of this service. There are 2 such services that we have sent our clients to that have reported back to us that they have had success. These 2 companies are:
- Specialized Credit Kyle Hart Contact info 866 660-6685
- Credit Associates Contact info 877-690-5415 or 773 610-6613
- Enviro Innovations Christine Weeks Contact info 708 932-6455
