Earlier than You Apply For An FHA Mortgage
One of the biggest worries about buying a home? Good enough credit to qualify. Do you know what it takes to increase your credit score? Do you know what it takes to do this without paying someone else to do things on your behalf?
Improving your credit score prior to an FHA mortgage loan application takes time, which is why financial advisors say it is best to start planning and saving your loan early.
As you improve your credit score, you need to change some basic habits related to your payments, and new habits can be an adjustment.
But that’s not why it takes time to fix your credit.
There are three basic questions to consider when looking to increase your score. They all have to do with consistency in using credit and paying back your financial obligations.
You need to pay on time, you need to reduce your credit usage on your accounts as much as possible (30% of your credit limit or less is ideal according to several sources), and you need to keep a history of on-time payments and good credit utilization.
At least 12 months prior to applying for a mortgage is highly recommended.
But that’s information you can read on ANY mortgage website or lender page. Here’s a not-so-well-known tip that can help you improve your credit score over time by considering some of the advice above AND working with a credit bureau.
Note that we did NOT say “CREDIT REPAIR” agency but CREDIT REPORTING agency. There is a trend among credit bureaus to help consumers improve their credit score by subscribing to or participating in certain programs.
An example – the Experian credit reporting agency offers its users a service. Have you ever heard of adding certain monthly financial commitments to your credit report to increase your score? The Experian official website advises consumers that “they can get credit for their phone and utility bills by adding positive payments to your Experian balance file”.
Not all credit bureaus offer this service, but this is a very good example of the thinking outside the box it can be helpful to try it out as you work on your credit score.
This type of approach can also be good for those who have thin credit files or non-traditional credit and want to work on building a credit history.
Remember, when paying for a third party credit repair, caution should be exercised with any service that offers to remove accurate negative credit information from your report – no matter what they promise, it will not happen.
You are free to dispute any entry on your credit report, but specific information will not be removed as a result of such dispute. Only incorrect information, outdated information, evidence of identity theft, and similar issues can be changed or removed from your report.
Find out more about the path to home ownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Home Buying Rights
Step 3: basic mortgage terminology
Step 4: buy a mortgage
Step 5: shopping for your home
Step 6: Make an offer to the seller
Step 7: get a home inspection
Step 8: home insurance
Step 9: what to expect upon graduation