Have you ever considered what a lender thinks when he or she reviews a credit report in relation to approving or denying a mortgage application? Well, the most common answers would be: What is their credit score? How is their credit history? What is their income? What is their debt to income ratio? Will they be providing a substantial down payment?
A huge down payment may dilute the negative effects of a spotty payment history or low credit score. However, be prepared for high fees and mortgage interest. In fact, the minimum score needed to purchase a home has increased in the past 12-18 months.
There is no way around having a low credit score. Even with a large down payment you will still need a good credit score to make home ownership a reality. Your goal should be a 758 average credit score to qualify for the lowest interest rates, according to CNN.com.
Raise Your Credit Score to the Minimum Necessary for a Mortgage
With minimal effort you can obtain your report and see exactly what is there. Often there will be mistakes or errors that you can dispute.
Your first step should be a dispute letter to the credit bureaus involved. Contacting the creditor directly to resolve the negative entry would be another way to start.
A well-written dispute letter will often result in the correction of the credit report, i.e. the removal of the negative entry. It is to be noted though that investigative techniques are often careless and error prone.
While investigating your claim, credit bureaus must spend time and man hours to resolve the dispute. Taking their time or ignoring the dispute is more to the liking of many credit bureaus. They hope you will throw in the towel and give up!
How Long Will I Have to Wait to See an Improvement in My Credit Score?
Many people want to know how long it will be before they can see a difference in their credit score. In most cases, a fair estimate would be 6-12 months.
This may seem like a long time; however, it is certainly a shorter amount of time than waiting 7-10 years for the negative entries to be deleted. Also, if you want to purchase a home, it is wise to wait the 6-12 months to improve your credit report.