Occasionally, due to various circumstances, you may find your credit score is lower than anticipated. This low credit score could prevent you from obtaining a favorable rate on your mortgage. The good news is that there are several actions you can take towards cleaning up your credit. Before anything, we recommend you speak with your trusted financial advisor to understand the best path to cleaning up your credit.
To get started, you’ll want to acquire a copy of your credit report and review it line by line to find any errors, omissions or duplications.
You are able to acquire a complete copy of your credit report from the three leading credit reporting agencies:
If you see entries on your credit report that you want to dispute, then you have the ability to submit a response explaining why it should be corrected. If the credit bureaus do not respond to your inquire within 30 days, then the contested item must be removed from your report per the Fair Credit Reporting Act of 1971. Credit bureaus are required by federal law to inform all creditors about items mistakenly noted on an individual’s credit report.
In the event that your credit report shows bankruptcy, you should note the length of time your report indicates. Chapter 13 bankruptcies appear on your records for 7 years, while Chapter 7 bankruptcies appear on your records for 10 years.
A variety of credit bureaus also offer help via credit counselors.
Judgments, Garnishments or Liens
Judgments, garnishments and liens are oftentimes a sign of an unstable borrower. Before closing on your home, these items must be paid in full, and all payments must be documented by a paid receipt from the creditor. A letter of explanation is also required from you. The exception is standard property tax liens, which do not have to be shown as paid in full.
Delinquent Child Support
In the event your credit report shows unpaid child support, you must acquire documentation from your credit bureau providing evidence that these items have been paid. You can present a letter from the court or the legal authority responsible for collection in the city and state in which you live. Copies of personal checks, documented payment plans or a letter from an ex-spouse will not suffice as documentation.
Your Loan Originator with First Choice Loan Services Inc. is ready and available to share with you the steps you can take and resources available to you to help your credit move to a better position for home financing.