How to Fix Your Credit to Buy a Home

When you begin shopping around for a mortgage loan, potential lenders will each review your credit report to determine if you are eligible for a mortgage and, if so, what interest rate you should pay on the loan. If your credit score is too low, it may be nearly impossible to secure financing to buy a home. There are, however, basic methods of credit repair that you can use to successfully improve your credit score and qualify for a mortgage.

Instructions

1

Pull your credit reports. You can do this by visiting annualcreditreport.com and pulling a free copy of your credit report from each of the three major credit reporting agencies. If you have recently been turned down for credit, you may also request a copy of your credit report from the lender.

2

Check your credit reports for negative entries. Negative entries on your file include late payments, charge-offs, bankruptcies, tax liens and collection accounts. Make copies of your credit reports and highlight each negative item that you find. Highlighting the entries will ensure that, when you dispute them, the credit bureau representative who reviews your claim will not have to dig through your report to locate each item you refer to.

3

Dispute the negative entries with the credit bureaus. You can do this by phone, mail or online. However, most credit repair professionals will tell you that sending in disputes via mail with a letter explaining why you are disputing is the most effective method for having derogatory trade lines removed.

4

Wait for a written response from each credit reporting agency. The credit bureaus legally have 30 days to investigate consumer disputes. After 30 days, they must provide you with the results of the dispute and, if your credit score has changed, an updated copy of your credit report.

5

Send a debt validation letter to any collection agencies whose trade lines were not removed in your original dispute. The Fair Debt Collection Practices Act grants you the right to demand proof that you owe the debt. Many collection agencies are unable to provide proof. If this occurs, inform them that leaving the debt on your credit file without proof is a violation of the FDCPA and that you are within your legal rights to file a lawsuit.

6

Write goodwill letters to any current creditors that are reporting late payments to the credit bureaus. Because a current creditor has no incentive to delete a late payment, a goodwill letter is merely a kind request that the company assist you in creating a fresh start. Many creditors will be willing to delete one or more late payment notations after receiving your request.

7

Dispute any charge-offs that are more than two years old with the original creditor. Request that the creditor provide proof that you ever had an account with the company and that your account was charged off due to nonpayment. Few creditors will maintain consumer records for very long after an account is closed, and if they are unable to verify the information, they are legally required to remove it.

8

Pull your credit reports again 30 to 60 days after you have completed your credit repair efforts. Not all of the negative entries will have vanished, but enough should be gone for you to qualify for your mortgage loan.