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We’ve officially been in our new home for almost 6 months now. I can’t tell you how grateful I am for this major milestone in our life. We worked so hard to get here and overcame many obstacles, one of them being our credit. Before we began the journey of buying our first home, we had to undergo a major credit overhaul. We knew that taking on a credit repair before buying a home would be a huge undertaking. From the medical bills to the student loans, we had a lot of work to do.
Increasing your credit score isn’t a simple task but with determination, the right resources, and a little help it can be done.
Tips for Increasing Your Credit Score Before Buying Your First Home
1. Know your credit score
The first step before you can even begin working on increasing your credit score is to know what your score is. You can pull your credit score from the three credit bureaus: Equifax, Experian, and TransUnion. This will allow you to know exactly what is on your credit report including all of the debts and late payments you may have. If you have any outstanding debts, the contact information for the creditor will be listed on the report as well. Getting your credit score and report before buying your first home is golden. It will keep you from being blind-sighted with any debts or outstanding balances when getting to the pre-approval stage.
Although I cringed at some of the things on our reports, I was happy because I now knew what I needed to address before we could move forward.
2. Create a list of your debts
Once we pulled our reports, we sat down to make a list of our debts so that we could come up with a plan. Our goal was to pay off most of our debts and pay down some of the larger debts like student loans. When creating our list, we started with the largest debts that we had and put the smallest amounts at the bottom. We created a spreadsheet with the date we acquired the debt, the creditor contact information, and the minimum payment amount.
Using a strategy like the debt snowball plan can help you to pay off your debts quicker and increase your score faster if you’re on a time crunch.
3. Pay off any outstanding debts
Creating a list of allowed us to see in writing which debts were outstanding. Those were the ones that we wanted to tackle first. If the amounts were too large for us to pay off, we contacted the creditor to set up a payment plan. This allowed us to pay down the debt while still remaining in good standing. Some creditors will even agree to remove the negative marks from your report once the debt is paid off but not always.
4. Keep credit balances to about 30%
Credit cards weren’t a major factor for us because we don’t have a lot. We each had one credit card with reasonable balances that we were able to pay down to 25-30%. The rule of thumb is to keep your credit card balances to no more than 30%. This shows lenders that you are responsible with your credit cards and able to maintain a healthy balance.
5. Work towards getting late payments removed
When we first got our credit cards we were very irresponsible. I wasn’t even 20 when I got my first card and was always forgetting to pay the bill on time. When we began having kids, we got a little better at managing due dates but still had late payments on our report from the past. Getting those late payments removed was important to us. We weren’t 100% sure that they would do anything for increasing our credit score but it was still on our list. We contacted our credit card companies and asked them to remove any late payments. What we learned is that most companies will remove a certain number of late payments as a courtesy. The number will vary of course by the company and some won’t remove late payments at all but it’s worth a try. Get them on the phone and explain why your payments were late and they may be able to help.
6. Raise your credit limits
If you aren’t able to pay your credit cards down to 30%, see if you can get your credit limits raised instead.
7. Pay your bills on time
Paying your bills on time is a no brainer. Late payments can affect your score and can be hard to get removed. Once you know that you are working towards buying a new home, you want to make sure that you pay every single one of your bills on time. Keep a calendar with dates and amounts of all of your bills so that you remember when to pay. You can also set alerts and reminders on your phone to help.
8. Plan ahead
Increasing your credit score isn’t an overnight thing. It’s a long process that takes, time, effort and money. You’ll want to start the repair as soon as you start thinking about buying a new home. It took us about 6 months and a lot of discipline to increase our score by 40 points. Once we got our credit report, we knew what our goal score was. We planned ahead and created a strategy to get us to that score. Keep in mind that during the repair time, it’s crucial that you don’t open up any new lines of credit as that will negatively affect your score. You’ll need to make sure that you have a savings or some sort of backup plan in case of a rainy day that doesn’t require using your credit.
10 Things That May Impact Your Credit Score
There are a laundry list of things that may impact your credit score. Did you know that every year millions of Americans are denied loans for homes and cars due to errors on their credit reports? On average, these errors can take up to four months to correct. Improving your credit score may take time, but it can be done. You have the right to good credit and the law is on your side to help them fix mistakes. The downside however, is that fixing errors isn’t always easy.
Here’s 10 of the top factors that may affect your score.
- Student loans
- Identity theft
- Purchasing a new car
- Home mortgage inquiries
- Medical bills
- Military deployment
- High debt to income ratio
- Late or missed payments
- Child support
While a late payment or derogatory mark from a creditor may seem harmless, it can have long-standing consequences and in some instances staying on your report for seven years.
Resources for Increasing Your Credit Score
When we initially set out to increase our scores, we struggled. We didn’t have any clue where to start and were sure that we weren’t going to be able to do this. There are so many agencies that claim to help you repair your credit but it was hard to determine who was credible. The credit repair industry has grown so much in recent years, creating a plethora of fact vs. fiction information. The first step before working towards repair was education about errors that can and need to be fixed.
Lexington Law is the oldest and most respected name in credit repair, and the only player in the category with the legal experience and technology to both advocate and drive results for consumers. They provided affordable access to legal expertise and the exact resources we needed for credit repair.
Lexington Law has long-standing relationships with all three of the credit bureaus: Equifax, Experian, and TransUnion, which is a major plus when choosing their services.
We’re in our very first home now and it was worth every single struggle. Although we’ve repaired our credit, we still have some debts to tackle like those pesky student loans. With the right resources and staying up to date on our report along the way, I’m sure we’ll be debt free in no time with our ideal credit score.
Are you in the market for a new home? Lexington Law can help you get on the right path to homeownership.