When you realize that you are ready to afford a home of your own, the first and most important item to consider is your financial situation.  For a lender to see you as a good prospect, the first thing they look at is your credit score.  While there are very few perfect scores, you can (and should!) take the time to improve it before you start looking at prospective homes. 

 

  • - Begin by requesting a free credit report from all three reporting agencies.   Look for errors and report them to the credit bureau and company that posted them.  Legitimate collections that have been paid will not be removed from your credit history for seven years, although they will be marked as paid.
     

  • - Late payments hurt your credit score.  Stay current by creating a written budget with due dates for your bills or set up automatic drafts through your bank. 
     

  • - Pay off your credit cards!  This is particularly important, because the more outstanding debt you have, the lower your score.  Begin by paying off the smallest balance. Larger balances can be paid off sooner by increasing your payments or send equal payments twice per month if the creditor allows. 
     

  • - According to FICO™, it is better to pay off a credit card than canceling the account.  Use it as minimally as possible--simply charging a once-a-month take-out meal will keep it active. 
     

  • - Having just one credit account in good standing is better than none for those who have not started establishing credit history. Shop around for a credit card with a good interest rate and apply. 
     

  • - Avoid new credit accounts while you are trying to bring your score up. Pay cash for everything, and if you do not have the cash, unless it is an emergency, do not buy it. 
     

  • - When you cannot see a light at the end of the financial tunnel, contact a reputable credit repair agency that can assist you in getting your bills paid, manage your finances, and increase your chance of becoming a homeowner. 

 

Plan on spending up to a year to bring your credit score up to a number that will impress lenders, not to mention getting a better interest rate.  Much like taking up exercise and a new diet to get into shape, take it slow, increase your efforts every month, and you will soon be showing off the results--in your new home! 

 

Courtesy of Chester County PA Realtor Scott Darling.

 

Photo credit: student loan hero