3 Tips to Fixing Your Credit and Qualifying for a Mortgage

3 Tips to Fixing Your Credit and Qualifying for a Mortgage

Fixing Your Credit and Qualifying for a Mortgage signPhoto Credit

It can be frustrating to go through the headache of being turned down from receiving a home loan.  Fortunately, you’re not the only person to have walked this path, and the good news is the trail has been blazed and your path to receiving a mortgage is just around the corner.  Follow our guide on how to fix your credit and qualify for a home mortgage and you’ll be moving in no time flat.

Tip #1: Fix Credit Report Mistakes

Believe it or not but your credit could dramatically improve just by reviewing your credit report, and making a few phone calls.  You’ll want to review your report from all 3 of the major credit companies like Equifax, Experian, and TransUnion, and make sure they’re all reporting the same thing.  The easy to spot fixes are those in which two of the three companies have one thing, and the third has something completely different.  For example two of the credit companies have you down as having paid off that old late payment fee from last year, but one company has it written down that you still owe.  Finding these quick and easy mistakes are just that, quick and easy so don’t hesitate to review your credit report.  Just go to each credit company’s website and request a free annual report and start reviewing!

Tip #2: Fix Those High Balance Credit Cards

If you’ve maxed out a credit card, or carrying near maxed out balances this can be extremely damaging to your credit score.  Even if you’ve never missed a payment, and have had no other negative hit to your credit, this one issue can drop your score tremendously.  Your goal should be balances with no more than 30% of your total available credit on that particular card.

Now there are two ways to do this, and the obvious first way is to simply pay down the debt.  Once you’ve made enough payments and have dropped your balance bellow the 30% mark your credit score should increase.  The second way is a little more creative, but completely do-able.  What you want to do is actually increase your credit limits on those particular cards, and this is actually easier than you may expect.

When that monthly credit card bill comes in you’ll be tempted to pay that minimum payment….DON’T!  Instead pay more then what’s required by a minimum of 150%  So for example if your monthly bill comes in at a payment of $50 you’ll pay $75 instead.  The more you pay over your minimum balance due the better, because it tells the credit card company that your monthly expenses aren’t as demanding as they initially thought, and you can “afford” more credit.  After doing this for about 6 months call up your credit card company and simply ask for a credit extension.

Tip #3: Open Up a New Credit Card

Sometimes the best way to improve your credit score is to have more credit cards.  Important warning though: Discipline Required. The more available credit you have to your name, the less impactful your debt looks in the eyes of the credit bureaus, and the overall effect is an increased credit score.  Though your credit will take a temporary hit because of the background check your new credit card company will require, the overall implications is more credit to your name.  The key here is to NOT go on a crazy spending spree with your new card.  Instead make small purchases that you can pay off in 2 months.  You’ll be tempted to pay it down in full at the end of each month, but it’s actually good to let the credit card companies make a little bit of money off you each month.