Fixing Credit to Buy a Home: Credit repair tips and guide

My husband and I want to buy a house for first-time buyers. How can we fix our credit?

Submitted by Ferlenzia M.

Owning a home is a dream that many people have. To make that dream a reality, most people get a mortgage loan. To qualify for that type of loan, you need steady income, savings for upfront costs, low debt, and “good” credit. The minimum credit score depends on the type of loan you are getting. For example, a conventional loan requires a credit score of least 620. Alternatively, a government-backed FHA loan allows for a minimum credit score of 580. Both types of loans are offered by most lenders.

If your credit score doesn’t meet the threshold for the type of loan you are seeking, then you’ll have to learn how to fix your credit to buy a house. To that end the first thing you should know is that raising your credit score takes time and a history of on-time payments – of at least six months.

The guide below contains some tips for how to repair credit to buy a house:

Correct any inaccurate information

Credit repair to buy a house should first entail getting the authorities to fix mistakes that exist in your credit report through no fault of your own. So, if you find a mistake on your credit report, follow the instructions provided to fix the mistake.

Pay bills on time

Repairing credit to buy a house cannot be done overnight. It is a gradual procedure that starts with bills. Your payment history, or track record of paying your bills on time, is the most significant factor of your credit score. Commit to making on-time payments by preparing and following a realistic spending plan and setting up bill payments systems that work for you.

Minimize outstanding debt

How much you owe is also an important factor of your credit score. Your debt load affects your ability to borrow and how much you can borrow. Keep your debt manageable by borrowing cautiously and keeping balances low on credit cards. If you have existing debt, make a plan to pay it off or down.

Re-establish credit to buy a house

If you have had problems paying your bills on time, get and stay current on past due accounts. Open new accounts strategically and pay them on time to raise your score over the long term. Your options include:

  • A secured loan or credit card, where your savings acts as collateral if you do not make your payments. If you are considering a secured credit card, look for one with limited uses and a low interest rate.
  • A loan with a co-signer – someone who agrees to be responsible for the payments if you do not make them.

Whichever option you choose of re-establishing and fixing your credit to buy a house, it is critical that you make your payments in full and on time. With time and focused attention, you can get your credit score where it needs to be to realize your dream of homeownership.

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