A good credit history is very important these days.
Especially if you plan on buying a home.
Consumers with good credit scores easily qualify for mortgages, and save hundreds of thousands of dollars by getting low interest rates. On the other hand, consumers with bad credit have a lot more difficult time obtaining mortgages.
Individuals with bad credit end up with high interest rate loans, large down payment requirements, and very often get denied for home loans altogether. But fortunately, bad credit doesn’t have to be a permanent problem. There is a solution for bad credit which will help you qualify for a mortgage loan in the future.
Pay your current bills/debt on time. If you’re struggling to pay your bills on time, you will need to create a budget which outlines your income and all of your expenses. Cut back all non essential expenditures and make sure that you do not make any late payments.
Make payment arrangements. If after cutting back your expenses your income still can’t cover your bills, contact your creditors to work out alternative payment arrangements and make sure to make all payments on time per your agreement.
Reduce your debt. Debt is kryptonite to mortgages. A high amount of debt lowers your credit score and increases your debt to income ratio (DTI), which makes it more difficult if not impossible to get financing. Pay down your debt, start with your credit cards and pay them down until the balances are no more than 30% of the credit limits. Then, pay down your debt to get your DTI down to 31% or less.
Repair your payment history. If you have derogatory accounts such as late payments, collections, charge-offs, repossessions, etc… appearing on your credit report, you will need to repair your credit history. Payment history accounts for 35% of your credit score and removing these types of accounts will help increase your chances of getting a loan. You may either fix your credit yourself or hire a professional credit repair agency like CreditFirm.net to help you fix your credit report.