Low credit scores can make a mortgage inaccessible. Applicants should check their status in advance and dispute any reporting errors. If you are shopping for a home, but the score is unimpressive, it is high time you worked on it. There are two ways to achieve a boost — through repair and rebuilding.
Basics of Repair
The term refers to the correction of reporting flaws. Unfortunately, information collected by major bureaus in the United States — Experian, Equifax, and TransUnion — is often imperfect. One in five Americans has one or more mistakes in their official histories. They lead to falling credit scores and rejections of mortgage applications.
When this is the case, top credit repair companies come to the rescue. They identify the most influential errors and persuade the bureaus to remove them. While doing this on your own is feasible, it is challenging, particularly when you want to get the results as soon as possible.
Different changes in your reports affect the score differently. How soon will your credit score go up after paying debt? The effects are not immediate. A repair firm will suggest the most efficient strategy for your goal, considering the lender’s requirements. For example, payment history is the most influential element of FICO (35%) and VantageScore (40%), so removing late payments gives a strong boost.
How to Repair the Score
Credit repair includes several stages. First, your data will be collected from all three sources. Secondly, it will be analyzed to establish the errors and prioritize them based on impact. Afterward, the experts will gather evidence to support the claims. They will liaise with lenders and collectors if necessary.
Finally, formal dispute letters will be sent to the respective bureaus. Every agency has 30 days to investigate each case. It may accept the changes or ask for more evidence.
Fixing the score for free is possible if you have the knowledge and patience to cope with the task. You can collect your own documents from www.annualcreditreport.com and pore over them. Then, gather proof like bank statements and other documents from the lenders. Free templates of dispute letters may be found on the website of the Consumer Financial Protection Bureau.
How to Rebuild the Score
If the score is fair, it is the result of your own borrowing behavior. To improve the status, you need to take out more loans and pay them back with diligence. Additionally, consider the following hacks.
1. Tweak Credit Utilization Ratio
It is the proportion between your credit card balances and limits. For example, if you have five cards with a total limit of $5,000, and $1,000 has been used, the ratio is 20%. It is higher than what experts recommend. It is advisable to keep the proportion below 11%: the lower — the better. To change the ratio, you could pay off the balances, ask the banks to extend your limits, or do both.
2. Use Experian Boost
This bureau allows you to add more information to boost the score. This includes utility bills and other payments. Even your Netflix subscription may come in handy. On average, consumers see a growth of 8-12 points. Sadly, not every lender uses a score formula based on Experian reports.
Payment History Is Crucial
This element of score calculation is the most powerful. Paying on time is absolutely crucial. If you happen to miss a payment, contact the lender immediately.
Every institution has a particular reporting cycle. If you make the payment as soon as possible and ask them not to report it, your request may be granted. This method is not guaranteed, but it could work.
The Bottom Line
Plan your borrowing in advance. If the score is too low to qualify for a mortgage, fixing it could take months. The strategy depends on whether the total is fair or erroneous. In the second case, you will achieve the quickest results by enlisting the help of credit repair companies.
If the status is caused by your own mistakes, raising it is more difficult. You need to work on different components of the score and make timely payments. Check your score and reports more often, so it is easier to fix them.
SUBSCRIBE FOR MORE! HERE'S WHY:
1. You get 7 free books
2. You get the best money & productivity articles
3. You get the latest updates - all in one email per week