Repairing your credit to qualify for a mortgage can seem like an intimidating task, especially if you don’t have a good understanding of what it takes to raise your credit score and make yourself a more attractive borrower. However, repairing your credit can be a straightforward process, and understanding what it takes to get your credit in a good place can make all the difference when you’re looking to buy a home.
In this article, we’ll discuss what it takes to repair your credit and the steps you should take to get your credit score in a mortgage-worthy condition. We’ll also discuss how to maintain your credit score so you can be sure you’re always in the best position possible when it comes to qualifying for a mortgage.
The first step in repairing your credit to get a mortgage is to understand what goes into your credit score and how it affects your ability to borrow. Your credit score is made up of five factors: payment history, credit utilization, length of credit history, new credit accounts, and types of credit used.
Payment History
Your payment history is one of the most important factors in your credit score. It reflects how responsible you’ve been with making payments on time and not letting accounts go into collections. The more consistent your payment history, the better your credit score will be.
Credit Utilization
Credit utilization is the amount of credit you’re using relative to the amount of credit you have available. This is calculated by taking your total outstanding balances and dividing them by your total available credit limit. A higher credit utilization ratio can hurt your credit score, so it’s important to keep this in check by making payments on time and staying below 30% of your total credit limit.
Length of Credit History
Your credit history is another important factor in determining your credit score. The longer your credit history, the better, as it shows that you’ve been responsible with managing your accounts for a longer period of time.
New Credit Accounts
Opening new credit accounts can have a negative effect on your credit score, as it can indicate that you’re taking on more debt than you can handle. However, if you use the new accounts responsibly, you can actually improve your credit score by showing that you’re a responsible borrower.
Types of Credit Used
The types of credit you have can also affect your credit score. Having a mix of different types of credit, such as a mortgage, a car loan, and a credit card, can help improve your score.
Now that you understand the factors that go into your credit score, it’s time to start repairing your credit. The first step is to get a copy of your credit report and review it for any errors or inaccuracies. If you find any, you can dispute them with the credit reporting bureaus and have them corrected.
Next, you should check your credit utilization ratio. If it’s above 30%, you should try to pay down your balances to get it below this threshold. It’s also important to make sure you’re making all of your payments on time, as this will help to improve your payment history and your credit score.
Finally, you should consider opening a new credit account or two if you don’t already have them. While it’s important to use these accounts responsibly, having a mix of different types of credit can help to improve your credit score.
Final Thoughts
Repairing your credit to get a mortgage can seem daunting, but it’s actually a straightforward process. Understanding the factors that go into your credit score and taking steps to improve them can make all the difference when it comes to qualifying for a mortgage.
Make sure you review your credit report for errors, keep your credit utilization ratio low, and make sure you’re making all of your payments on time. Doing these things can help you repair your credit and get the mortgage you’re looking for.
