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  • Toni Kelley

Let's Talk About Credit...

Yes, that scary six letter word is up for discussion today lol. C-R-E-D-I-T!! Bottom line is, you need to get your credit in order prior to even looking at property to purchase. As a matter of fact, it's very unlikely that a real estate agent will take you out to look for homes without a pre-approval letter from a lender. Also, most homeowners and builders will require a pre-approval letter to accompany any offer you put in towards the property that you would like to purchase. Please keep in mind that pre-approval requires more than just decent credit score, but we will discuss the other factors in another post.


Generally speaking, most lenders need your credit to be at least 630 when it comes to purchasing a home. It all depends on the lender, and the type of loan you are seeking.


So, when you are thinking about buying a home in the near future, check your credit. You can do so by getting your one free report for the year, or get Credit Karma. Credit Karma allows you to view your credit report, and gives you a pretty accurate credit score. I personally have found that my Credit Karma scores are slightly lower than my actual credit scores, but that may be different for everyone.



After you pull your credit report take a look at the dates on the accounts. It is important to remember that in each law has a statue of limitations on debt. Alabama has a six year statue of limitations on most debt. In addition to that, your credit report will drop most credit history after 7 years. It is important to consider these things when trying to identify what you need to start with when improving your credit.


Other things to recognize are companies that buy old debts that have not been paid and pursue you. A debt that you originally owed a furniture store has been turned over to a company that you never heard of. You will most likely get mail and phone calls from this "new" debt collector. The easy thing to do in this case is to write a letter to the credit bureau disputing this debt. If you have Credit Karma, you can do this through the app, by filling out a form, and answering the questions they pose to you. The credit bureau will give this debt collector 30 days to send in documents proving that you owe the debt to them. This is vital, because most of these companies can not prove that they bought your debt from the original company. If this is the case in your situation, the item or items will be removed from your credit report within one or two months. The company attempting to collect the debt may continue to call and send letters. You could always send a cease and desist letter in regards to them contacting you, but regardless, its off your credit report.


Next, call the companies that you owe collections to and try to negotiate a pay off balance that is less than what is owed. Always include them removing the "collection" entry from your credit report in the negotiation. Otherwise, the collections account will be reported as "satisfied", and will remain visible until the 7 year mark.



Tips to Improve Credit Score & Pay off Debt

  • Putting credit cards and other bills that report to the credit bureau on automatic draft payments (payments will be on time)

  • Pay more that "minimum payment" if you can

  • Ask someone that you know with excellent credit to add you as an additional guarantor for one of their accounts. If they are reluctant, remind them that you don't need access to the actual credit card or account. Them simply adding your name to the account will allow you to get the entire history of that great account added to your credit report.

  • Call your credit card companies and ask for an increase in credit limit. This can improve your score almost instantly because you will have more available credit than debt that you had previously. (If granted increase, don't utilize card more!)

Remember


Credit is not the only factor in pre-approval, and even people with good credit don't get pre-approved instantly. Your work history, how you get paid at work, and your debt-to-income ratio is very important as well.

And PLEASE, after being pre-approved, don't make any big purchases! I've seen people rack up thousands of dollars on furnishings for their new home only to find out that they put their new home in jeopardy, by making those purchases before closing.


There are several books regarding credit repair, and reputable credit repair companies that can help you get on track if you are feeling overwhelmed about doing it on your own. *I do not endorse or sponsor any companies mentioned in my blogs* I simply give you info from first hand experience or experiences from people that I know and trust.


From Credit Repair to Millionaire by Donna L. Fox has great hidden gems in it, some I mentioned above.


I also know quite a few people that were very satisfied with the services they received at Credit 1 USA here in Huntsville, AL


Start getting your credit prepared for home ownership now, I'm with you every step of the way.


Talk to you soon-TK

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