One of the most frustrating obstacles a potential homebuyer can face is credit problems. They can keep you from getting a loan, or they can prevent you from getting a great rate that will increase your buying power and save thousands of dollars over the life of the loan. Sometimes all it takes is a few late or missed payments to ruin years of good credit. But, how can you fix it without waiting forever for bad reports to go away?
- The first step is to check your credit report and find out just what the mortgage company is going to be seeing on there. Despite all the ads you see online and on TV, the only credit report website endorsed by the federal government is annualcreditreport.com. You can visit once a year for free, without any fear of hidden charges. This report won’t tell you your FICO credit score, but it will show you any negative marks against your credit.
- Once you have a report, scrutinize every black mark on there. Were you really late? Is that even your debt? The U.S. Public Interest Research Group estimates that one in four reports contain serious errors which can end your chances of getting new credit through no fault of your own.
- Now that you know what the problems are, it’s time to take action. Simple mistakes like closed accounts which are showing as open can be corrected quickly by the credit bureau. Bigger mistakes need to be disputed. File a dispute and the creditor has 30 days to prove that the debt or negative mark is legitimate or else it will be removed from the report entirely. This can give you a quick boost in your credit rating.
- Negotiating is another important step. Say you have the money to pay a collections agency for a legitimate debt of your own. Don’t just hand over the money. First, ask them if they will DELETE the debt from your report if you pay it off. If they delete it, your credit will instantly improve as though it was never there. If it just gets marked as Paid, then it still counts against your FICO score.
- Did you know that many debts have an expiration date? Know your state’s statute of limitations! In NJ creditors have 6 years to sue you or collect on the debt. After that time, you can tell them that the statute of limitations is past and they have no right to sue. Judges will instantly dismiss any case brought after that time. That 6 year counter can, however, get reset. Don’t use any cards associated with the debt and, if you acknowledge the debt as yours or make payments on it, it’s considered new, not old, debt. Always remember that when you talk to a collections agency, you’re not under any obligation to immediately claim a debt as yours and start making payments right then and there over the phone. Don’t be intimidated if they try to pressure you. Just ask them to send you the information by mail and examine their claims carefully before taking any action at all.