How to Fix Bad Credit for Buying a Home

If you have bad credit, buying a home is a dream that can turn into a nightmare. If your credit is in bad shape, your request for loans may be turned down. Moreover, if you do manage to get one, it may be at very high interest rates. The good news is that bad credit can be fixed over time by putting the time and effort into repairing your credit. Then, you can get approval for a mortgage you can afford.

Instructions

Repair Old Credit

1

Start by analyzing your credit report. You will need to assess your current credit situation to identify the negative items that are damaging your credit score. You can obtain a free credit report from each of the three leading credit bureaus (Equifax, TransUnion, and Experian) from www.annualcreditreport.com.

2

Write to the credit agency to explain any inaccuracies on your credit report. Include proof and relevant documents that will substantiate your claim and send them by certified mail. The credit bureau is bound by law to investigate any discrepancy in your credit report. If they do not receive any confirmation of the existence of the debt within 2 weeks from the creditor, they are required to delete it and send you an updated report.

3

Settle all of your valid collection accounts. When you pay off your creditor in full, ask for removal of the negative mark on your credit report. Keep all documents related to the payment and ensure that you have an agreement with creditors first that verifies that the account will either be removed or marked as "paid in full."

4

Negotiate with creditors whose negative accounts on your credit report are valid. If the items on your credit report are valid and they are detrimental to your credit rating, you need to consider some long-term strategies to improve your credit scores. In some cases, creditors are willing to settle for amounts much lower than the debt owed in order to recoup the balance owed. If an agreement is reached between you and your creditor, ensure that you document all communication and terms for removal.

5

Negotiate with creditors whose marks on your credit report are only 30 days past due. Late or missed payments, even 30 days old, still negatively affect your credit score. Fortunately, many companies will remove these infractions on your credit report if you explain why you were late making payments and also agree to remit what is due.

Establish New Credit

6

Establish and maintain a new line of credit. Consider obtaining a secured credit card from your bank in order to start fresh and show creditors that you can be trusted to pay your bills on time. Conduct all of your your financial transactions in an orderly manner and be prompt with payments.

7

Adopt new habits in the future when dealing with credit. Repeating previous mistakes in the way you handled credit will only keep you trapped in the habit of adding negative accounts and marks on your credit report. Simple habits you can employ include paying your credit card balances well before the due date. This way, you can avoid late fees, which can accumulate as negative remarks on your credit report.

8

Use your credit cards in moderation. Your debt-to-income ratio should be manageable. Keep your balance on the card less than half the credit limit. At any point of time, avoid having more than five cards at a time.