To begin improving your credit, start by ordering free copies of your credit reports from TransUnion, Experian and Equifax. Most lenders use information from all three credit reports to determine if you qualify for a loan, as each report will be a little bit different.
Request copies of your report for free at AnnualCreditReport.com. You can do this once every 12 months for free, or after you have been denied credit, employment, or insurance due to information on your credit report.
Now, go over your credit report with a fine-tooth comb. Virtually everyone has some type of mistake on their credit report, whether it is big or small, as credit bureaus use information provided by creditors. Look for typos, outdated or incomplete account information, inaccurate account histories, or any information that is not yours. If you find mistakes, dispute them with the bureau and provide any documentation you have.
If you have correct negative information, it will remain on your credit report for seven years, although bankruptcy can remain on your credit file for 10 years. Most lenders will want to see recent good credit history. The older the negative information, the less it impacts your credit score.
It is also a good idea to pay off any delinquent accounts you may have, such as charge-offs and collections. Under the new FICO scoring method, doing so will improve your credit. While lenders are not yet using the new FICO score model, they will still want to see that you have honored your obligations. Unpaid collection accounts will always be viewed by an underwriter as worse than paid collections.
You can attempt to pay off the accounts with a creditor in exchange for having the negative information removed from your credit report.
If your level of debt is high compared to your income, the underwriter will not be sure if you can afford your mortgage. Your mortgage application can also be denied.
Work to bring down monthly debt payments to a maximum of 10 percent of your income to improve your chances of getting approved.
Creditors want to see a history of on-time payments. If you have late payments on your credit report, work to lessen their impact by establishing good credit history today.
Always avoid opening new credit accounts within a few months of applying for your loan, or until your loan has closed. New credit accounts will look suspicious to your lender, who may assume you are having financial difficulties.
Rapid rescoring is a technique utilized by us to help borrowers improve their credit score. Rapid rescoring gets new information added or updated on your credit report within days, instead of the weeks it normally takes a credit bureau to update information.
Quickly increasing your credit score may help us see your ability to pay in a more accurate light.
Think of rapid rescoring as a way of updating your credit report to get errors fixed as fast as possible. You can discuss rapid rescoring with us after you pay off credit cards or dispute errors.