Cleaning up your credit history and restoring your score is the best way to ensure that you're able to receive a mortgage loan approval when you're ready to buy a house. Credit scoring is a major factor in financing a home or acquiring other types of loans. But with effort, you can restore your credit and maintain a high rating.
Prove Creditworthiness
Get a loan, and then pay it off completely to show creditors and lenders that you're responsible enough to handle credit accounts. A loan approval alone doesn't improve credit. But by paying off the account completely, the lender issuing the loan will update your credit file and report the account as satisfied or paid. This positive remark adds points to your credit score, and other lenders reviewing your credit file will take this information into account and possibly extend additional lines of credit. Look into smaller installment or personal loans with your bank. Have collateral to secure the funds and increase approval odds.
Due Dates
Along with paying off balances completely to help restore your credit, you've got to pay creditors by your due date. Missing a due date or deciding to skip a payment because you don't have the cash drops your credit score. And if you plan on applying for loans in the near future, a late payment on your record can negatively impact a creditor or lender's decision. Plan to pay well before your due dates, and don't be afraid to contact lenders if unable to make a payment. Ask for an extension or a skip-payment option.
Collection Accounts and Old Debts
Cleaning up and restoring your credit involves more than simply maintaining your active or existing accounts. Old delinquent accounts on your credit file can prevent your credit score from increasing. Addressing these older accounts and working with your creditors to settle the debt or pay off the debts in full helps repair a bad credit history. Taking responsibility for an old debt doesn't automatically remove the remark from your report. But if you ask kindly, creditors may update your report and delete this information to help boost your score.
Credit Report Accuracy
Creditors should update your credit file after you've paid off a debt. But sometimes, creditors falls behind and they don't send regular updates to the bureaus. Irregular updates and other reporting mistakes can bring down your score. Monitor reports yourself and get a copy of your free reports from Annual Credit Report.com each year.
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