We are quickly approaching the beginning of a new year. Many people see the new year as a new beginning and a time to make a fresh start or seek some sort of improvement from the past year. Many folks may decide to consider looking for a home and taking out a mortgage in the coming year. Before seeking a mortgage loan, it is smart to review your credit history and make any improvements you can in order to help yourself get the credit you want or need.
Check Your Credit Report
One thing that I encourage every consumer to do, and what I regularly do myself, is to check your credit reports annually. You can obtain your credit reports once a year, for free, by using www.annualcreditreport.com . Once you go to this website, DO NOT GET YOUR CREDIT REPORTS ONLINE! I strongly recommend obtaining them via U.S. mail. This is preferable in certain situations where you may need to dispute an incorrect item. You can get credit reports from all three major credit bureaus, Experian, Equifax and Transunion by using the form found at annualcreditreport.com. Once you obtain your credit reports, scour them for any incorrect information. If you see incorrect information on your credit reports you need to dispute these in writing with the credit bureau that is reporting it.
Pay Down Your Debts
Secondly, you may want to pay down as many outstanding debts as you can before applying for a mortgage. This may include paying off credit card balances or other revolving debts. This will lower your credit utilization ratio.
You may be in a situation where you have “no credit”. Sometimes, this can be just as bad as “bad credit”. You may not have enough available credit for a lender to make a determination of your credit history. To remedy this, you may want to consider opening a new credit card or taking out a small loan. The key here is not to go overboard and to always, always make your payments on time!
Another tip, as recently reported in USA Today by Navindra Persaud, the Motley Fool, is to avoid unnecessary inquiries on your credit report. This may look to a mortgage lender like you are looking to borrow money too often. This article goes on to describe two types of credit inquiries, the soft inquiry that might be made by you checking your own credit or by a future employer; or a hard inquiry, one that is made when you apply for a loan.
Make Payments On Time
Of course the best way to keep your credit score high is to make your payments on time on all of your debts. You should avoid late payments, repossessions, foreclosures, judgements, and tax liens at all costs. However, this is not always possible. I see a number of people each year who have been advised by a potential mortgage lender to seek bankruptcy options to help with their credit before seeking a mortgage. In certain situations, you may not be able to repair your credit on your own and, depending on how bad your credit report looks, filing a bankruptcy may improve your credit faster than what you can do outside of bankruptcy.
If you feel that your credit has gotten too bad to try to fix on your own, we may be able to help you. Please call our office nearest you and schedule a free consultation with one of our attorneys to discuss any options you may have with us.
Amy K Tanner is a shareholder in several of the Bond & Botes Law Offices. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She focuses primarily on consumer bankruptcy law in the Huntsville and Decatur offices.Read her full bio here.