Buying your first home is an exciting milestone. Buying a home is a multi-step process. The most important step is to insure that your credit score is as high as possible. Your FICO credit score is a three digit number ranging from 300-850. The higher the score, the better interest rate which equates to a lower payment. For a small fee, your credit score is available through myfico.com If your credit is less than stellar there are things you can do to improve it before meeting with a mortgage lender.
The first step in managing your credit is to familiarize yourself with the credit reports. There are three credit bureaus: Equifax, TransUnion, and Experian. Each bureau will allow you to review your credit report for free once a year. When you are planning on purchasing a home, it is in your best interest to download or print your report from each bureau. If you want to make sure everything is accurate with no intention of buying for a few months or a year, then you should pull your report from a different bureau every few months.
Once you have reviewed your credit report(s), dispute any incorrect information. Most people find a few discrepancies. It may be as simple as a misspelled name or an account number that has been transposed by mistake. Other discrepancies could be more damaging such as an account or purchase that you never authorized. This could indicate identity theft and should be addressed immediately. Any error could cause your credit score to be many points lower. Using a service like Credit Karma will allow you to review your credit reports, learn your FICO score, and allow you to dispute any discrepancies electronically.
After you have reviewed your credit reports and reported any inaccuracies, you can begin to build your credit up and improve your score. First and foremost try to pay down or pay off new or high interest credit cards. It can be hard to pay extra on accounts especially when you are short on cash. My best advice is to follow a strict budget, cancel any memberships that aren’t being used or you can go without for a while, and sell items to bring in extra income. The ratio of the balance on your credit cards compared to the credit limit is called your credit utilization ratio. If you have a $1000 limit on a card with a $600 balance, your credit utilization ratio is 60%, which is considered very high. You want to pay down the balances on all of your cards as low as possible. The lower the balances, the higher your credit score will be.
From this point on make sure you pay every bill on time every month. Even one late/missed payment one month can hinder your credit score.
Now that you have increased your credit score and cleaned up your credit reports, it is time to meet with a mortgage lender to get pre-approved and start house shopping. The mortgage lender will pull credit reports, verify your income, bank documents and tax filings. We can recommend local lenders that are knowledgeable and can work with individuals with lower credit scores, as well as offer special programs for teachers, police officers, and veterans.
One last and extremely important tip: Once you have your pre-approval and until you have closed on your new house, do not open any new accounts or make any large purchases. This can hinder the mortgage process and cause you to lose your dream home.
When you are ready to purchase your home, or if you have any questions regarding the home buying process, please give me a call at 970.393.3424 or sign in to my website.
So many good people experience times in their lives where they face financial adversity. The 2008 recession in particular impacted millions of people. Throughout the course of my career I’ve had to set many people straight on the topic of old debt that I thought I would blog on the topic in hopes to help more people understand their rights and how to make educated decisions.
Here you will have what is on the three big credit bureau’s: Equifax, Transunion and Experian.
Go thru your entire report with a highlighter and highlight anything derogatory and all “old debt” items you see. Now, you may be surprised on some of the dates you see. For example, let’s say you had a credit card debt of $10,000 dating back to 2008 and the credit card company turned your account off in 2009 and began their collection process. Now you see that same “old debt” but the date says it’s a debt where they stared collections in 2013. How can that be right? Read on.
Step 2: Find your state’s Statute of Limitations. In short, what this means is how long your creditors have to collect on your debt. So go back to the $10,000 credit card debt from 2009. If your state has a statute of limitations of 6 years, they can only go after you until 2015. But now it’s 2017 and you’re still getting collection calls and/or threatening letters in the mail. So many people ask me, “how can they just adjust the date beyond the statute of limitations”? The answer is they can’t, but in the next point I’ll explain what happens.
Step 3: Find out if a law office or attorney bought your debt! It doesn’t have to be a law firm; in fact, many of these companies are nothing more than sales organizations/credit collection companies that simply try to scare people into paying on a debt the original company sold off to them! These are companies that use in many cases, very aggressive, somewhat shady business practices to scare the lights out of you in an effort to collect. They purchased your debt for pennies on the dollar and set up very aggressive campaigns to frighten you into one of a few things: 1. Admitting you owe the debt. When you do this, they “re-age” or what’s called “park” your debt. This is a big reason people see old debt “within the statute of limitations….again…and again…and again”. An illegal practice, especially when the creditor did not notify you in writing that they intend on re-aging your old debt. 2. Say or may any notion that you intend on paying. This can take you backwards and resurface even the oldest of debts. The easiest way to handle these people is to “hang up” on them.
Should you find yourself fighting an old debt, here is my recommendation:
Do research on the company coming after you. Are they really a legit law firm or posturing themselves as such?
Write back to them within 35 days of their initial contact. Request verification of the debt. They legally must show proof that you owe them, proof of the actual sum and proof that they are entitled to collect.
If they are harassing your cell phone, home phone or mailbox, write them a letter to cease all communications with you. They must comply with the Fair Debt Collection Practices Act.
Dispute any “re-aged” actions you see on your credit report directly with them; and not acknowledging in your letter that you owe the money.
If you don’t see the date removed on your credit report, you can write directly to the three main credit bureaus directly. They legally must remove it if they do not written confirmation.
Over the years, so many people in these situations simply are not educated on their rights as a consumer. As a result, “old debt” prevents many people from moving forward with their plans to get a mortgage and own the home they wish to live in.
If you need help or advice on this matter, I would be happy to help. Thanks for taking the time to read my blog.
The information on this website is designed to inform and educate only. The views and opinions expressed herein are simply those of the author and do not reflect the policy of my company.