Fix Your Bad Credit, Get Better Mortgage Loans
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by: marciafreeman
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When you need to qualify for mortgage loans, a poor credit rating is a problem. You will have to pay higher interest rates, your fees may be higher, and you will get quite a few offers from predatory lenders. Before you give up, accept whatever youre offered, and wind up saddled with mortgage loans with restrictive riders and high interest rates, take a time out and raise your credit rating. Then return to the mortgage market, and see how much better a deal you can make.
Taking these actions will improve your credit rating and make you more attractive to mortgage lenders:
* Reduce your current debt. For a good credit score, you should be paying 40% or less of your total monthly income toward your debt. Payments that count as debt include current mortgage loans, student loans, credit cards, and car payments. Lenders will also consider the amount of the loan you are requesting when they calculate your debt to income ratio, so also swap out your current mortgage and swap in your prospective mortgage (or add in your prospective mortgage, if you do not have a mortgage right now) and make certain the number is still 40% or less of your income.
* Raise the percentage of credit you have available versus the percentage of credit you have used. The more credit you have available, and the less you have used, the better your score will look. Making yourself look more attractive involves not only reducing your debt, but raising the amount of your credit line. Call credit card companies with whom you have a good relationship and ask whether they will extend your credit line. Also apply for new credit cards if your credit score is high enough to allow you to take out new cards. And leave unused accounts open! Common wisdom used to say that creditors should close unused accounts, but now this tactic worsens your credit score by lowering the amount of credit you can command.
* Examine your credit reports closely and dispute any black marks on your record that are inaccurate or incorrect. Fixing mistakes and clearing up misunderstandings can increase your credit rating dramatically.
* Wait. Your credit rating is partly a function of time. The more time you spend paying your bills punctually and avoiding trouble, the less you are perceived as a credit risk. Lenders will consider you to be more stable, and thus more appealing, when you reapply for mortgage loans.
Applying for mortgage loans with good credit is difficult enough. Poor credit can make the process agonizing. Before you apply for mortgage loans, tidy up your credit reports and improve your credit score, and make the process that much easier and more successful for yourself. Articles Mortgage rates | Home loan rates | Loans | Refinance mortgage |
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