Credit Score Repair

Credit score

If you have bad credit, you probably know it and feel some sort of shame. I know that I did when my credit was less than stellar. Applying for a car loan after finding the perfect car and getting rejected. Applying for another car loan and getting an 18% rate because my credit was so bad. But life happens and sometimes bills don’t get paid on time for lots and lots of reasons. The good news is that it is fixable. There are people who specialize in credit repair that don’t cost you any money. It takes time and effort, but you can fix it. I was so ashamed about my credit initially that I didn’t want anyone else to look at my report, which was my first mistake. As soon as I started working with a lender, the process to fix my credit began. And after years of having to pay high interest on every loan, it felt so great to go into the car dealership and negotiate 0% interest.


Why is your credit score important?

If you ever need to borrow money to pay for large expenses like a house or a car, a good credit score will get you the best rate. Credit bureaus give you a score based on your on-time payments, the balances you carry on your debt, how old your accounts are, and if you have opened/applied for new accounts. The banks looks at your credit score and debt-to-income ratio to see if you would be a good candidate to loan money. Because banks are in the business of loaning money they are eager to get you to a place where you would be a good candidate for a mortgage. 


What to do if your score is not where it needs to be?

I work with a few lenders who offer credit counseling. They will pull your report and find ways for you to improve your score, whether that means paying down balances, writing explanations for debt that went to collections, or challenging judgments. If you don’t pay fairly close attention to your report for whatever reason, there are likely mistakes on it. I know that when I struggled with credit, I ignored my report because I wasn’t ready to deal with it and it was a source of frustration for me. When I finally went to a mortgage lender, I handed over my report and said, “I know I am not ready for a mortgage but I do want to buy a house in about a year.” She and I went through the report together, and I worked on my credit for a full year before being eligible for a mortgage. 


What about student loans? Do I have to wait until I pay them off before I can get a mortgage?

The quick answer is no. You can have student loans and still be eligible for a mortgage. It has to do with your debt-to-income ratio, that other number that lenders use to determine eligibility for a loan, which we will tackle next week. 


If you would like me to refer you to a lender who also does credit counseling or other questions about the market or buying/selling process, please reach out. 

If you missed last week’s conversation about NIFA and want to learn more about using a low interest loan to help with your down payment, click here.