Repairing Credit to Buy a House

Buying a home often calls for a credit score of 680 or higher. Lenders use credit scores to assess whether an applicant qualifies for a home loan. Credit scores provide a good indication as to whether applicants will repay the funds as agreed upon. Thus, it's wise to repair a low credit score prior to buying a home. Not only does this help applicants get a loan approval, but having a higher credit score also helps them secure a better rate on the mortgage loan.

Instructions

1

Fix a bad payment history. Lenders will not approve your mortgage loan application if your credit report reveals several missed or late payments. Start paying all your bills on time. This improves your payment history and increases your credit score.

2

Pay off credit card debt. Credit card balances affect credit scoring. Repair your credit and raise your score by keeping balances below 30 percent of your credit limit. Completely pay off the cards or simply pay down your balance to improve your chances of qualifying for a mortgage loan.

3

Develop a plan to pay off old accounts. Ignoring delinquent accounts such as collection accounts can hurt your credit rating and lower your chances of buying a house. Call up old creditors and set up an arrangement to pay off these debts. Ask your creditor to remove the delinquency from your credit report once you've paid the debt.

4

Familiarize yourself with your credit report. Order your credit report from Annual Credit Report before applying for a mortgage to check for erroneous information, such as charge-off, judgments, liens and collection accounts, that can lower your credit rating. Write the credit bureaus or contact the reporting creditor and ask them to investigate reporting errors and remove mistakes.

5

Stop applying for new accounts. Each application for a new line of credit or credit card results in a credit inquiry, and inquiries take points from your credit score. Avoid applying for credit until you're ready to begin the mortgage loan process.