Buying your first home is an exciting and life changing experience, but you may want to improve your credit score before you begin the home purchase process. When you apply for a loan, you will want to be in the best financial position to get the best financing possible. The one thing that will disrupt your efforts most quickly is a rejected loan application.

To make sure you can qualify, boost your credit score and optimize your credit before you begin house hunting. Your credit score will improve when you make regular payments and reduce the balances of outstanding loans.

Your Credit Reports

Read your credit reports – The three major credit reporting agencies TransUnion, Experian, and Equifax, have to provide a free copy of your credit reports once a year. Download from the web at annualcreditreport.com and read these agencies say about you, it can be an eye-opening experience.

Inventory your liabilities – Your credit reports should have all of your borrowing and outstanding debts listed. These documents can run to dozens of pages.

Dispute any anomalies – Credit agencies have been known to record inaccurate and false information about consumers. Read your reports with a skeptical eye and be prepared to challenge inaccuracies. Getting incorrect data removed might make a difference in whether you get a loan or how much interest you pay.

Your Credit Score

Free credit scoring services – Your Fair Isaacs and Company or FICO Score is a mathematical calculation of your credit worthiness. FICO gives you a snapshot of your credit condition where higher means a better chance to get your mortgage application approved. Some services charge to give you this information, but you can get it free on the web if you shop around.

Credit monitoring – If you are concerned about credit fraud, consider paying for credit monitoring by one of the big three credit agencies or FICO.

Create A Proactive Budget

Write it all down – Create a budget on paper or use a spreadsheet application. You get a much clearer picture of what you owe when you see it all on one page. A budget will also help you make a plan to reduce your debt and improve your credit score.

Online budget managers – Subscription based online budget management services like Mint.com by Intuit will help you organize your personal finances and make a budget.

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Pay Off Loans

Make extra payments – Use any cash you have to pay down the balances that are reducing your credit score. It will help your credit both by showing that you can make payments and by reducing the amount you owe. If you don’t have savings you can:

Spend less – Cut your living expenses by any means necessary. It may take some ruthless self-discipline, but it will open up the world of home ownership to you.

Earn more – Become the resident expert at volunteering for overtime, get a second job, or a gig that gives you extra income and pays everything toward reducing high loan balances. Also, the time you spend working you will be spending less money.

Financial Kung Fu

Renegotiate your credit card interest rates – Call your credit card companies and ask for lower interest rates. If they say no, offer to make larger payments in return for a lower interest rate they might agree to new terms. What do you have to lose?

Consolidate your credit cards debt and student loan debt – Consolidating loans and credit cards may offer you the chance to pay down balances more quickly. Paying less interest means you can take bigger bites out of the principal.