How to Manage Poor Credit and Get Ready To Buy a Home
Purchasing a new home gives borrowers a feeling of excitement and sense of security. With the purchase, they are no longer renting and have full control over the property. Repairing poor credit helps buyers get the credit scores they need before applying for a mortgage.
Why are the Credit Scores Low?
The account holder must do some soul searching and identify negative habits that are causing their credit scores to become lower. For example, paying monthly payments late has a damaging impact on credit scores. Late payments and failing to pay off a debt on time generate negative listings. These listings cause lenders to view the individual as financially irresponsible. If the person wants to buy a home, they must change their spending habits and manage their finances more proactively.
How to Deal With Negative Listings
Negative listings are often charged-off or closed accounts that were sold to a collection agency. On the credit history, there are listings for the original creditor and each collection agency that opened an account for the debt. The best strategy is to find out what agency has the account currently and negotiate a settlement offer. Once the offer is accepted and fulfilled, the listings are removed by the credit bureau. If the account isn’t removed immediately, the individual files a dispute with each credit bureau.
Reducing the Debt-to-Income Ratio
Lenders review the debt-to-income ratio whenever an applicant tries to get a mortgage. The highest ratio is 43% for most mortgages, and anyone who exceeds the ratio won’t get a lower interest mortgage with affordable payments. Taking themselves to task to get the debts paid off and reducing the ratio is the only way the borrower can correct this issue. Borrowers who want to prepare for a home purchase and need to eliminate debt contact Debthunch through LinkedIn right now.
Improving the Credit History
Disputes are the only way for anyone to get rid of listings on their credit reports. It takes only a few minutes to complete the web form and submit it to each credit bureau. The credit bureaus launch an investigation and determine if the debt is still valid. If the debt doesn’t belong to the person, more steps are taken to protect them from identity theft.
Understanding the Difference Between Good and Bad Credit Listings
Any accounts that are in great standing whether closed or open provide good credit references. It is best to leave these accounts alone and continue to pay the monthly payments. They would have to start all the way over establishing credit if the person pays off all listings on their credit history. Bad credit listings are closed and have a history of late payment, and they should be managed and removed.
Home buyers must create a plan ahead of time to avoid credit problems and denials. Seeking financing for a home requires them to qualify based on their credit scores, debt volume, and income. If their credit is a hot mess, the individual won’t get a loan. Borrowers can submit an application for a debt consolidation loan by contacting a lender now.