Do I Need to Have Good Credit for a Home Purchase?
If you are considering a home purchase, it’s important to understand what is contained within your credit report. Your track record as a debtor is one of the primary deciding factors in determining if a home loan will be granted (loan approval) and how much it will cost you (interest rate).
If you plan to buy a home now or in the future, be proactive. Besides keeping your credit in good order, plan to examine your credit report three to six months before your home purchase to ensure its accuracy.
In speaking with home buyers, I always recommend the following steps in understanding and repairing your credit to buy a house:
1) Obtain your annual free credit report from the three credit-reporting agencies: Equifax, Experian and TransUnion from AnnualCreditReport.com.
2) Review your credit report carefully. If you detect inaccuracies, contact the consumer bureau and creditor immediately. The credit bureau and creditor must make necessary changes for free and within 30 days of proof of the mistake.
3) Pay your debts on time every month. Work to pay down and pay off credit cards.
4) If you are in over your head and need help, ask for advice from a reputable, nonprofit credit counselor. Avoid firms that promise a quick fix for a high pre-paid fee. Examine all credit counseling disclosures carefully to understand how your payment plan will be reported to your credit, along with any hidden fees or clauses that may affect your credit repair plans or budget.
5) Avoid bankruptcy, unless there are no other options for your situation. This is a serious mark on your credit and remains there for 10 years. Make sure to exhaust all other options before filing for bankruptcy.
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