You’ve finally decided to take the plunge and purchase a house. You’ve visited your bank and applied for a home loan, hoping to put in an offer on the home of your dreams. But the news from the bank isn’t good. Either the interest rates are beyond your means, or you were turned down.
If you were turned down for a home loan this indicates that your credit score is poor. Or it may be fair but you will have to pay high interest rates to get the money you need for a home. This all depends on what is on your credit report and if the lender thinks you could pay the loan payments.
If you are planning to buy a home, work on improving your credit score before you apply for a loan. Give yourself at least a year to get your credit back on track and then visit your lender.
A good credit score will increase your chances of qualifying for a home loan at a decent interest rate. Start by getting hold of all three credit reports so you know where you stand.
Check them over for any inaccurate information that could keep you from qualifying for a loan. These should be disputed and if it turns out they are not your debts, they will be taken off. If your score card shows unfavorable debt information that is correct, make it a priority to pay off those amounts, even if it’s just a little extra each month.
Your efforts to pay down your debts on a regular basis will demonstrate to your creditors that you’re serious about repaying your debt. Once they notice your efforts, they’ll be more likely to report regular payments to the credit bureaus, ensuring that your credit scores improve.
Even if you have debts that you owe on your reports, you can dispute these as well. If the information on your report cannot be verified within a certain amount of time, they must remove this information.
This is completely legal, however if it is removed from your credit report, it could reappear later. If at a later date they prove the debt is yours, they can put it back on the credit report.
Set a bill schedule and stick to it. If your accounts are paid by the due date, many creditors report this to the credit agencies as well. Consistently late payments can also affect your scores. Potential lenders like to see payments that are up to date.
If you’ve had a rough financial road, it will be difficult to straighten up your score quickly. But don’t give up; you need to eliminate all the negative information on your report. You might even consider requesting that the credit agencies recheck your records; some people have success with this approach.
You might ultimately have to forget about erasing your past mistakes and focus on the important thing - getting more positive items to show up on your credit score. Then you’ll be able to move on to applying for that loan to purchase your dream house.