If “purchase a home” is a goal on your list of to-dos this year, it’s a good idea to start reviewing your credit–as this information helps determine the type of loan you can qualify for, as well as your monthly payments. Here are 3 tips from the experts at Yahoo Finance on how to prepare your credit for home ownership.
So you’ve decided you’re ready to purchase a home. But is your credit where it needs to be? If not, then you’ll want to start working to improve it, as your credit helps determine the loans for which you may qualify and your monthly loan payments.
We spoke with Joe Parsons, branch manager of Caliber Home Loans in Dublin, California, for some tips on preparing your credit for homebuying season, which is just weeks away.
1. Know Your Starting Point
“The first place to start is to see what your credit looks like now,” Parsons says. You can view a free snapshot of your credit report here on Credit.com or pull your free credit report from each of the three major credit reporting agencies — TransUnion, Experian and Equifax — on AnnualCreditReport.com. Remember, pulling your credit report creates a soft inquiry, so it “does not affect your credit score one iota,” Parsons says. (You can learn more about hard inquiries here, which do affect credit scores.)
2. Check for Derogatory Entries
When checking your credit report, you’ll want to be on the lookout for any black marks that could slow down the loan-approval process. “The things a buyer wants to know about are collection accounts, past-due accounts and items of public record like tax liens,” Parsons says. “These should be dealt with” straight away, as they could drag down your credit, not to mention harm your ability to take out other loans. A good starting point is to give the reporting agency or institution a call and find out what (if anything) can to be done to repair your credit.
3. Pay Credit Card Balances
The two things that most affect your credit scores are any accounts that are currently past due and high credit card balances, says Parsons. Fortunately, both are easy to fix. If an account is past due, you can contact the creditor to negotiate a payment plan, Parsons says. Once you’re making payments again, the account will no longer be listed as delinquent on your credit report, but previous late payments will remain on your record. They will have less of an effect on your credit score as they age.
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