How to Fix Your Credit to Get a Mortgage

Are you looking to buy a home but are concerned about your credit? Don’t worry – here’s a comprehensive guide to help.

Having a strong credit score is fundamental to buying your home, and we, as a mortgage company, understand more than anyone how important it is to have a strong credit score. This blog will provide effective strategies to fix your credit and increase your chances of getting a mortgage approved. Let’s explore some options for improving your credit and helping you reach your dream of owning a home.

What Is Credit Repair & How Does It Work?

Before we delve into the strategies, let’s gain a clear understanding of credit repair. We’ll answer questions like “What is credit repair?” and “How to fix a bad credit score?” Additionally, we’ll explain the significance of credit history, credit scores, and the minimum credit score needed for a mortgage. Understanding these fundamental concepts will lay the groundwork for your credit improvement or credit repair journey.

Credit Repair vs. Credit Rescore

Credit Repair

Credit repair refers to the process of identifying and rectifying errors, inaccuracies, or outdated information on your credit reports. It can also include resolving disputes, judgments, collection accounts, or other derogatory marks that hold back your credit score.

It begins with reviewing your credit reports, identifying any discrepancies, and filing disputes with the credit bureaus to have the errors corrected. The next step is to start a discussion with creditors who have not been made whole and review any repayment options. Typically, once an overdue debt is sent to a collection agency, those agencies are willing to settle the debt for less than the full amount. This can help resolve derogatory events while saving you on out-of-pocket expenses.

Finally, credit repair involves implementing strategies to improve your credit habits, such as paying down debt early, establishing a positive payment history, and diversifying your credit mix. The goal of credit repair is to address negative information and improve your overall creditworthiness. This process is very in-depth and can take several months to see improvements. However, addressing the deeper items harming your score can have a substantial impact on improving your score.

Credit Rescore

On the other hand, a credit rescore is a short-term, specific service offered by credit reporting agencies and allows for “rapid” updates to your credit score based on recent changes in your credit profile. While this short-term solution can help boost scores quickly, it has limited effectiveness if there are multiple items negatively affecting your score. Also, there is no guarantee that a rapid rescore will be successful – there is only a % chance of likely success.

In general, the credit rescore is most useful when there are only one or two items that can be quickly handled to result in a significant positive change. This typically includes things like such as paying down or paying off a credit card with a large balance, resolving a collection account, or having an erroneous late charge removed from your report.

This process starts with a lender or credit expert analyzing which debts are the most likely to result in improved credit scores. Afterwards, updated information is provided to the credit bureaus along with a service fee for the faster processing time in recalculating your credit score.

How Can I Get My Credit Rescored?

Credit rescores can be helpful if you need an immediate improvement in your credit score because you are on the cusp of qualifying for a specific mortgage loan program or better mortgage loan terms with a score improvement.

As part of our commitment to exceptional client experiences, JVM offers free credit rescores to clients who have locked their loans with us and can qualify for better programs, lower rates, or cheaper mortgage insurance premiums by undergoing a rapid rescore. 

Contact us to discuss your credit rescore.

Assessing Your Credit Score & Timeline To Fix Your Credit

Now that we have a grasp of credit repair, let’s assess your current credit situation. We’ll guide you on how to check your credit score and understand what a bad credit score entails.

We will address the question “How long does it take to fix your credit?” This will help to set realistic expectations for your credit repair timeline. Remember, every credit situation is unique, and improvement timelines can vary.

How To Fix Your Credit Score

To buy a home, you must have an acceptable credit score. The minimum credit score allowed is 560; but, applying for a mortgage with this score comes with many qualifying restrictions. A score of 600 or higher will provide far more flexibility with mortgage loan approval.

If you are finding yourself below those levels, below are some strategies to help you fix your score.

How To Review and Dispute Credit Report Errors

Reviewing and disputing credit report errors is a crucial step in the credit repair process. A dispute is a formal process in which you challenge the information presented on your current credit report. Keep in mind that the goal of creating a dispute is to work towards resolving the dispute. While you may see a small improvement in your scores when you file a dispute, this is only a temporary fix. And, without the dispute coming to a resolution, your scores will likely drop once the dispute is decisioned by the creditor.

To begin, obtain copies of your credit reports from the major credit bureaus. You can obtain a free copy of your credit report from AnnualCreditReport.com. Or, you may call 877-322-8228 or complete and mail the Annual Credit Report Request form to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

For more information on how to obtain your free credit report, please see the Consumer Finance Protection Bureau’s website here.

Once you obtain a copy of the report, carefully review it and pay attention to details such as personal information, account balances, payment history, and any derogatory marks.

If you identify errors or inaccuracies, gather supporting documentation, such as receipts or correspondence, to substantiate your claims. Next, initiate the dispute process by contacting the credit reporting agencies in writing or through their online platforms.

Clearly explain the errors you’ve identified and provide the necessary evidence. The agencies are required to investigate and respond to your dispute within a specific timeframe. Be patient, as the credit dispute process may take some time to resolve the flagged credit report errors.

Here is the contact information for each credit bureau:

Equifax

Online: www.equifax.com/personal/credit-report-services/credit-dispute/

By Mail: Download the dispute form
Mail the dispute form with your letter to:

Equifax Information Services LLC
P.O. Box 740241
Atlanta, GA 30374

By Phone: Call the phone number shown on your credit report or call (866) 349-5191

Experian

Online: www.experian.com/disputes/main.html

By Mail: Use the address provided on your credit report or mail your letter to:

Experian
P.O. Box 4500
Allen, TX 75013

By Phone: Call the phone number shown on your credit report or call (888) 397-3742

TransUnion

Online: dispute.transunion.com 

By Mail: Download the dispute form 
Mail the dispute form with your letter to:

TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19016-2000

By Phone: (800) 916-8800, Monday – Friday 8 a.m. 11 p.m. ET, Saturday and Sunday 8 a.m. – 5 p.m. ET.

Establish Good Credit Habits

Establishing good credit habits is essential for improving your credit score and ensuring long-term financial stability.

The most important variable that affects your score is your on-time payment history, so aim to pay your bills on time. If you already have good payment habits but are not seeing your scores improve, the issue may be that you may be on top of paying bills that do not report to the credit bureaus. This includes items like your cell phone bill, utility bills, and other subscription services.

One way to boost your on-time payment history is by reaching out to those cell phone, utility, and subscription service providers and opting to have them report your payment history to the credit bureaus. One free way to do this is through Experian Boost; you may read more about it here.

Another prudent practice is to hold low credit utilization ratios, which involves keeping your credit card balances as low as a % of your total available balance. 10% or less utilization is “perfect”, but anything under 30% still helps keep your credit scores strong for mortgage financing. For example, if you have a credit card with a $10,000 credit limit, try to not charge it more than $1,000 (a utilization rate of 10%) and pay it off as soon as possible. You do not need to hold credit card balances for your scores to improve.

Additionally, maintain a diverse credit mix by having a combination of credit cards and installment debt such as auto loans or student loans, and other types of credit. This demonstrates your ability to handle different forms of credit responsibly.

Pay Down Debt and Manage Finances

Paying down debt and effectively managing your finances are crucial steps to building credit and achieving your financial goals. Start by creating a budget that outlines your income, expenses, and debt obligations. Gaining insight into where your money is going can help you make better financial decisions. It can lead to cutting back on spending or saving more.

Prioritize your debts and develop a debt repayment plan, focusing on paying off high-interest debts first. Remember that you do not need to carry a balance on a credit card – paying it off immediately will not you’re your score. Finally, consider consolidating your debts with a cash-out refinance to lower your payments and potentially lower your interest rates.

What Are Credit Repair Services?

Credit repair services companies are professional organizations that employ credit counselors who specialize in helping people improve their FICO scores and solve credit-related problems. These companies typically offer a range of services. Examples include: – Reviewing credit reports – Identifying errors or inaccuracies – Filing disputes with credit bureaus – Providing guidance on how to rebuild your credit.

Credit repair services work by leveraging their knowledge and expertise to navigate the complex landscape of credit reporting and scoring systems. They communicate with credit bureaus, creditors, and collection agencies on your behalf. This is to address any inaccuracies or discrepancies in your credit report or to help settle overdue collection accounts.

Additionally, credit repair services may provide personalized recommendations and guidance on debt management, budgeting, and responsible credit usage. It is important to remember that credit repair services can be helpful, but they cannot guarantee a specific outcome. They also cannot remove accurate negative information from your credit reports, but they can help you form a strategy to address it.

What Are Credit Rescore Services?

Credit rescore services are specialized services provided by credit reporting agencies to expedite the recalculation of an individual’s credit score based on recent updates or changes to their credit profile. Unlike traditional credit score updates, which typically occur monthly, credit rescore services can provide a faster update to reflect significant positive changes in a shorter timeframe.

These services are often utilized when someone is in the process of applying for time-sensitive financial transactions, such as a mortgage or auto loan, and need their credit score to reflect recent improvements. For example, if a person pays off a large credit card debt or resolves a collection account, a credit rescore can ensure that their credit score is updated promptly to reflect these positive changes. This allows lenders to consider the improved credit profile when making lending decisions, potentially resulting in more favorable loan terms or increased eligibility.

It’s important to note that credit rescore services are typically available through credit reporting agencies and are often facilitated by the individual’s lender. Most credit reporting companies do not directly interface with consumers.

The lender must provide updated information or documentation to the credit reporting agency on your behalf. The credit reporting agency then recalculates the credit score based on the new data. While credit rescore services can provide a quicker credit score update, the results are not guaranteed. So, it is critical to work with a reputable company like JVM Lending who understands this process intimately inside and out.

How Long Does It Take To Repair Credit?

The timeline for credit repair can vary. This depends on different factors, such as the complexity of the credit issues, the amount of negative information, and individual circumstances. While there is no fixed timeframe, it’s important to set realistic expectations.

Generally, credit repair is not an overnight process and requires consistent effort and patience. Some credit repair actions, such as disputing errors on your credit report, can take several weeks or even months to resolve.

Building positive credit habits, such as making timely payments and reducing debt, takes time to reflect positively on your credit score. It’s important to stay committed to the process and maintain good financial practices.

Over time, as you address the negative factors and establish positive credit behaviors, you should start to see gradual improvements in your credit score. Everyone’s credit repair journey is unique. It is essential to focus on the progress made, not just on the timeline.

Credit Repair & Your Mortgage: We’re Here To Help

Fixing your credit is a vital step on your path to securing a mortgage and achieving your dream of homeownership. By implementing the strategies outlined in this guide, you can take control of your credit and improve your creditworthiness. Remember that credit repair is a journey that requires patience, persistence, and responsible financial habits. Stay committed to the process, regularly monitor your progress, and celebrate each milestone along the way.

If you’re ready to explore mortgage options and learn more about how your improved credit can help you qualify for a mortgage, contact JVM Lending to talk to an expert. Our experienced team can provide personalized guidance tailored to your unique situation and help you navigate the mortgage process with confidence.

If you’d like to talk to a credit repair specialist immediately, we highly recommend speaking with Ken Strey of Scorewell, Inc. at (925) 478-5213.