People with no credit or credit issues often shy away from buying a home. Driven by fears about how their credit status will affect their ability to buy a home they want, they decide not to make a move on the house of their dreams.
Those fears, however, are often not justified.
Credit Issues? No Problem
Buying a home with credit issues is possible. And certainly, no one is alone when it comes to credit issues. Whether it’s student loan payments or high balances on credit cards, many face the same issues you face. This is especially true with credit cards.
The key is taking the steps to address the issue.
Know Where You Are
The first step is to find out if your credit is as bad as you think. In some cases, credits scores remain high enough for a good mortgage loan interest rate even if you have had issues in the past. Whatever the case, the first step should be to check your credit score. Getting one is free once a year. In the United States, visit the Annual Credit Report site. In Canada, visit TransUnion Canada or Equifax Canada.
Credit reports are not error-proof. Check your report thoroughly to see if it contains any errors, then fix them immediately. This will quickly raise your credit score.
Pay Off Cards
Pay off any credit card balances you have as quickly as possible. Once you have the balance down to zero, don’t close the cards. Having available, unused credit can improve your score.
Avoid Late Payments
Going forward, make a strong effort to not pay any bills late. This will keep delinquent payments from dragging down your score. Keeping payments current over an extended period also shows potential lenders you are working hard to re-establish a good credit rating.
Find The Right Loan Company
Some lending companies are very aware that people go through tough times. These companies, such as the ones that partner with Apply and Buy, are more willing to work with those who have experienced credit issues. It’s also helpful to get pre-approved for your loan, giving you a set budget and the confidence you need when searching for a home.
In Canada, entering into a consumer proposal with creditors can give you a solid plan for paying off debt. Consumer proposals tend to have less of an impact on your credit than a bankruptcy, which is why they have risen in popularity. You must first learn if you qualify. If you do, getting into a consumer proposal can keep more money in your pocket and get you out of debt relatively quickly.
It’s important to keep in mind that you are not alone if you have an imperfect credit score. Take these steps to get your financial life moving back into the right direction. One tough period does not define you. Don’t let bad credit cause you to abandon your home ownership dreams.