Blemishes and events we'd rather not remember have one thing in common: they can be wiped off. Whether the blemish is on your shirt, furniture, or credit history, it can be cleaned up. Clearly, a tarnished credit history should not prevent you from owning a house. Late payments, repossessions, write-offs, and bankruptcy are sure to leave stains in your credit history the size of a crater. The good news is that they can be cleaned. The bad news is that it cannot be done overnight. In fact, cleaning up your credit history would most likely take you a year at the very least.
You Can't Clean House Without Cleaning Up Your Credit History
A home mortgage lender is a businessman who will not fork out any sum without the assurance of getting it back. This is why home mortgage lenders verify would-be homeowners' credit history before granting them their loans. Credit history is as good an indicator as any of a borrower's willingness to pay off debts on time. For the same reason, blemished credit history make home mortgage lenders nervous - and with good reason, too! Think about it. If you are a home mortgage lender, wouldn't you quail in your shoes at the possibility of not getting repaid?
Spotting the Spots
While home mortgage lenders would rather have borrowers with pristine credit history, they don't shut the doors on borrowers with smudges on their ratings. In fact, home mortgage lenders are very understanding when it comes to late payments and reporting errors. They are not as forgiving, however, of unpaid debts or loans that have been written off as bad debts by creditors.
So, what kind of spots do home mortgage lenders look for in your credit history? They're on the look-out for old, outstanding debts and bad debts incurred anytime during the last 12 to 24 months.
Spots No Maid Can Clean
If your credit history is riddled with old, outstanding debts and recent debts, don't call the maid or a credit repair company. Many credit repair companies promise you miracles. They swear they can clean up your credit record overnight. Always take claims like this with a grain of salt. The only person who can clean up your credit history is you. How do you go about this mission?
* Pay your current bills on time. Continue doing so because this will reflect favorably on your credit history.
* Avoid borrowing anything while you haven't fully paid off your debts. Not only should you work at getting out of debt, you should also focus on staying out of it.
* If you have many loans to pay off, work out a schedule for eliminating as many of them as you can. Many home mortgage lenders do not grant loans to people who owe too much. As a rule of thumb, mortgage payments should not go over 36 to 38 percent of your monthly obligations, the amount of which is a combination of your credit card payments, child support, alimony, student loans, and the like.
Blemishes are seldom permanent. If anyone with a rag can wipe smudges off a coffee table, you can do the same, too, with your credit history.
You can't turn around without someone telling you this or that about the importance of your credit score. Unfortunately, they're all correct. You credit score has the power to help you get a small loan for your business, or a mortgage for a house, but only if you've managed your finances in such a way that your credit score is favorable. So you want to do everything in your power to keep your financial record clean. Many different factors go into your credit score, but these are some of the biggest mistakes you won't want to take to the bank.
Don't max out your credit card. Easier said than done, you might say, but it's essential. If you're using the majority of your available limit on any given card, or on more than one card, it tells banks and lenders that you're living off of your credit cards, and unlikely to be able to pay them back. Ideally, you should never carry more than 30% of your available limit on any credit card.
Don't make late payments. Again, easier said than done, but promptness counts big on your credit score. Not only can late payment allow your credit card company to jack up your APR and slap you with penalty fees, but it also puts your financial responsibility in question. Future lenders don't want to take a gamble on someone who has a history of missing payments. Keep on top of your payments, and you will be establishing yourself as a financially responsible person who they will feel confident lending to when it matters.
Don't give up on your credit score. People sometimes think that once they've missed a payment on their credit card, their credit score is already toast, so they may as well just keep missing them, or worse, not pay them back at all. They couldn't be more wrong. When it comes to late payments, the details matter. People who will be evaluating your credit care how frequently your payments were late, and how long you let them go. Missing a payment by two days once is different from missing it by two days every month, and missing your payment by a week is different from not paying it for two months.
And even if you have a blemish like this on your credit history, all hope isn't lost. If you can practice good money-management for an extended period of time after your payment hiccup, lenders will look more favorably on you. They care the most about the last two years, so don't mope around thinking that a missed payment from a decade ago is going to lose you your mortgage.
Don't use a card that doesn't report to the credit bureaus. Many people don't realize it, but not all lenders report to the institutions tallying up your credit score. You might think this would be a good thing?after all, if they aren't reporting, any bad behavior with this card won't be factored into your credit score, right? Wrong. Even though these cards won't report any card practices that would work in your favor, any problems that go to collections will work against you. This is the worst of both worlds. These credit cards can harm your credit score, but they will never improve it, not matter how responsibly you use it. Whenever you sign up for a new credit card, read the fine print and find out whether or not your lender reports to the credit bureaus. If you aren't sure, simply ask one of the lender's employees.
Both Rony Walker & Debbie Dragon are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Rony Walker has sinced written about articles on various topics from Finances, Breast Cancer and Mortgage. Looking for a ? Visit WhatAboutLoans.com to get a sample. Rony Walker's top article generates over 165000 views. to your Favourites.
Debbie Dragon has sinced written about articles on various topics from Finances, Credit Cards and Kitchen Home Improvement. Read reviews for and cards from all other major issuers at CreditorWeb.. Debbie Dragon's top article generates over 165000 views. to your Favourites.