Do you have bad credit but would like to buy a house?

There are some simple steps you can take to fix your credit and make it possible to get approved for a home loan.

When you apply for a loan with a lender, your reputation as a debtor is the main deciding factor in determining your interest rate and reliability.  This said, making your your credit is at its best is crucial.  Without a good credit history and score, lenders can also deny a loan outright, make the loan more expensive or heavily reduce your borrowing amount. If you think you have bad credit the five steps below will help you repair it.

#1: Get a credit report. Equifax, Experian and TransUnion, the three main credit-reporting companies, provide U.S. citizens a free credit report annually on request. Go to the Annual Credit Report website, or print out a form through the Federal Trade Commission’s website to obtain your free copies electronically. Otherwise, call toll-free at 877-322-8228, or send a request to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281 877-322-8228 annualcreditreport.com

#2: Investigate and correct mistakes on your report. The Fair and Accurate Credit Transactions Act states that if proved wrong, the credit bureau and creditor must make necessary corrections for free. If you discover a mistake on your report, get in touch with the consumer bureau and creditor immediately. Once proved, the mistake must be repaired within 30 days.  The key to this is to stay on top of it.  It may take several attempts to getting incorrect credit marks off your history but once these corrections are made, the better off you will be.

#3: Manage your current debts. If new debt is pulling down your FICO score, you need to create a plan to pay it off. Talk to your creditors and let them know about your financial situation to come up with a reasonable payment plan that’s acceptable to all parties. Most creditors will be pleased to help you make a plan to pay of your debts.  Make sure to make all payments as agreed or your score will show the consequences.

#4: Ask for help from trained debt professionals. If you’re having a hard time managing debts, you can always ask for advice from a credit counselor. Look for a nonprofit organization that has a good reputation and avoid businesses that promise a quick fix for a steep prepaid fee. Be careful to always examine your contract carefully for any hidden costs, fees or other clauses that can short-circuit your repair plans and budget.

Credit#5: Avoid bankruptcy, unless there are no other remedies for your debt situation. Since a bankruptcy filing is a significant black mark that stays on a credit report for 10 years, bankruptcy definitely has a negative impact on your chances of getting a home mortgage. Exhaust all other options before resorting to bankruptcy. Otherwise, you’ll have to wait for years to fix bad credit.

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