If you are one of the millions of people who lost a job in the last couple of years – you might have some “bad” marks on your credit report. Just because you had a few late payments, or lived off of your credit cards for a while, or even went bankrupt, or had a short sale… those are temporary issues. It doesn’t mean you are “out of the market” when it comes to buying a home. Credit Scores can be fixed (period). It just takes understanding what the Credit Models are looking for. Don’t let bad credit stop you from looking for a Home!
There are things you CAN do to increase your credit score!
There are several different kinds of Credit reports. The ones that a Consumer gets will not have the same scores that a mortgage lender pulls. Insurance companies, Car Dealerships – even Retail stores have different credit models and will be able to lend you money based upon THAT type of model. In general, however, the best thing to do when you are working to fix your credit is to remember this:
Your credit score is simply a reflection of what you’ve done in the past 6 to 12 months, and interpreted to mean that you will likely be acting that way in the next 6 to 12 months. What do I mean by that?
Well, let’s say in November of 2010 you were laid off. Maybe it took you until May of 2011 to get another job. Living in NC – we know that getting another job might mean that you moved here to take that job. So, expenses were up, maybe you missed some payments back then - but it’s now the summer of 2013. You are beyond that period of time. What we need to do is help you REFLECT the fact that things are better on your credit report.
How do we do that? Fortunately, when we talk with you, we have access to special reports that tell us specifically what we need to do to improve your credit scores by a factor of “X.”
For most of our customers, it takes 90 to 180 days to get the score up high enough to qualify!
The biggest mistakes we see people making right now are:
- Paying off collections without looking at the impact. Let us look at the report and tell you FOR SURE which ones will need to be paid off. When you pay off a collection, it triggers all kinds of new things to be added to your report (normally bad stuff) so let’s control what and when we pay things off.
- Allowing NEW Collections to go on your credit report – when you get a letter saying someone is GOING to report you for a collection – set up a $10 a month payment plan. Most of us can afford that. Pay them. Do not allow any NEW event go to Collection.
- Dispute Letters / Using an Attorney or Service that is going to Dispute Everything for you - this is an OLD “scam” that does not work! Meaning – if you dispute everything on your credit report, all of the Bad Credit that’s on there - you’re making a mistake. The Credit Scoring Models actually LOWER your score for doing this.
- Add NEW – GOOD credit to your credit file. This is actually the most important step to getting your credit scores up. If the only thing on your credit file is bad credit, that stinks, because the credit scoring models doesn’t realize that the bad stuff is behind you. You need to re-establish GOOD credit, and use it responsibly. An “All Cash Economy” (and we’ve done that at our house), makes sense, while you are finding your balance. But once you are feeling like it’s time to buy – you need to consider adding good credit.