Improve Credit Rating To Buy A Home

by Danny
(Houston, TX USA)

I am trying to buy a home but I need to improve my credit rating and score by 20 points. A public records judgment should be taken off my record but I also have 2 medical collections that will drop off next year. Both are under $300.

A third collection of $117 will also come off next year and a credit card collection of $1400 is about 4 years old. This is all that is left on my negative accounts.

A bank loan with a balance of $300 is up to date and paid on time for one year. I got this to improve my score.

Could you give me your opinion on which 2 items I could pay off to help increase my score by 20 points?

I am not sure if paying off old collections would help more than paying off an up to date loan account.


Hi Danny,

I applaud your efforts to improve your credit rating. I have always told my friends, relatives and clients that maintaining good credit is not an accident.

It is more like health. Taken care of, good credit will help us pursue our dreams. Neglected, credit separates us from things in life that make us happy.

So congratulations for getting your credit back on track. It is a great start to buying a house.

Now for specifics. There is no quick fix. But fixing bad credit to improve your credit rating is possible!

Follow these 10 steps to fixing bad credit and my guess is, in time, you will see even more than a 20 point increase to your credit score.

I hope you'll come back to my website again in the future. Of course, all of my information is free.

So remember to bookmark Get-Your-Best-Mortgage-Rate.com to your favorites and visit often for up to date tips for buying a house, mortgage news and refinancing advice.

You can also invite friends to comment on this page or create a page of their own like you did.

Best Wishes,





Your Online Mortgage Advice Friend

P.S. Go to my Best Mortgage Rate Blog, an entertaining source of mortgage information. Subscribe now to the RSS feed.

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Improve Credit Rating To Buy A Home

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Credit Matters
by: Jill

Your article made me think of getting and keeping a good credit record. I "pound" this into my kids. Both who I helped to get credit as students at a $500 credit line.

Daughter is now 2 years out of college and has a larger credit line without asking and my Son, who is in his third year also obtained his own.

But I wonder how many people when they get 'behind" are afraid to call the creditor and instead try to avoid talking to the creditor. So the "cost" of not calling is greater than the "cost" of calling.

It would seen that it cannot be worst than not calling. So, maybe you have written about this before, and you have a lot of info on your website to get through!!!

How long can you be behind before it actually goes on your credit report? ... basically maybe people have more time than they think to get past the fear of calling the creditor before it goes into the credit history.

Cheers, Jill
Credit Matters - How Much Time?
by: Kate Ford

Hi Jill,

So glad to hear from you. I missed your correspondence.

You had asked in your comment how much time someone has to call a creditor before a late payment becomes a derogatory mark on their credit history.

My experience with credit is limited to mortgage lending. Even at that, I am not sure if this is the same across the nation. My experience dealing with most mortgage companies who serviced the loan was as follows:

The "friendliest S&L" gave a free pass on the first late mortgage payment many years ago. They did not advertise this and I never recommended a homeowner test the policy to see if indeed it worked.

Incidentally, that bank, actually an S&L, is history, in a consolidation about 10 years ago. In fact in a bit of bank trivia, the institution who grabbed up that S&L and others 10 years ago has now also gone by the wayside in the current upheaval.

Back on topic, let's say a mortgage is due on the 1st. Technically after the 1st, it is late but a grace period extends until the 15th. Going past that deadline costs a late payment fee. Going past the 30th means a 30 day late reported to credit bureaus.

My experience is that most borrowers think they have more time, not less, before their credit is adversely affected.

The exception is the highly responsible, afraid of mortgage declination due to a 30 day late - 16 years ago. Gotta love 'em!

Kate

PS It just came to mind to mention that mortgages are paid in arrears. That means, unlike a car payment, the mortgage payment due March 1st is paid in arrears to cover February's interest.

So next time you refinance and someone suggests you are getting one free month with no mortgage payment, remind yourself that 30 days of interest gets tacked onto the home loan and will meet back up with you when you sell the house or refinance again.

Which is why I say there are no free lunches.

Kate
Good Credit Is Not A Luxury
by: Jill

In today's world, good credit is not merely nice to have. It is "a must have".

Your credit scores is a reflection of your promise to pay back what you owe. It not only affects you when you go to get a mortgage but many times when you go to get a job.
Employers use it as a measure of reliability, and given the state of the economy and the scarce jobs, good credit is more important than ever.

Tell you a story about what my mother did to me when I was very, very young. I was very excited about buying some toy. I had not received my allowance that week but "really, really" wanted the toy. So, I asked mom if I could "borrow" 5 dollars. she gladly lent me the money but I forgot about it.

A week later she came to me as said "where is my 5 dollars?"

I looked at her strangely and wondered what she was talking about because in my mind I thought of the 5 dollars as something she was giving to me because she was a great mom and wanted me to have the toy.

She looked me in the eye and said, "I may give you $500, but if you "borrow" 5 dollars I expect it back. So where is my money?"

She went on to say, "Always pay back what you owe and don't make the person who lent you the money have to ask for it. It is not good for the relationship."

Lesson learned!

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