Credit Repair to Aid in your Mortgage Hunt

I doubt it's any secret to anyone that your credit score effects not only if you get a mortgage, but also how much you're approved and your interest rate. For many first time buyers the thrill of getting their own home blinds them to the fact that a lower interest rate could mean they could afford more, or their monthly payments for the same amount would be lower.

The fact is that with a little investigation at the beginning of their mortgage hunt, and possibly a bit of bad credit repair work new home buyers could save them selves several hundred dollars. This article is going to investigate what you can do before applying for your first mortgage to ensure you will get the best rate possible.

Credit Repair Basics

The concept behind credit repair is that consumers can challenge items that appear in their credit report thanks to the Fair Credit Reporting Act. Why is this worth while? Your credit score (also known as FICO score) is what financial institutions use when determining if you are a favorable client for a loan.

By removing negative items that appear on your credit report in essence you are increasing your credit score. Of course with an increased credit score you have an increased chance of getting more money for your mortgage pre-approval, and/or a lower interest rate.

So back to how to do this....

Step 1:Request copies of your credit report form the three credit reporting agencies Experian, Transunion, and Equifax. You may have to pay a few bucks for each copy, but it's worth it.

Step 2:Review each credit report and look for items that don't seem to make sense. For instance bills that you know have been paid off in full but still show a balance, or possibly a credit account that isn't showing a limit. This can be a tricky one since a credit account that doesn't show a balance is literally over the limit at $1.00.

Step 3:Contact the credit bureaus in writing disputing the particular items you've discovered. When writing letters to the credit bureaus be sure to send all correspondence via registered mail, you want to have tracking numbers and be able to know that letters have been received.

The credit reporting agencies have to investigate and get back to you in a "reasonable" amount of time. This is usually considered to be 30-45 days, although there is nothing written in stone anywhere.

Step 4:Start the process all over again. Normally, you would only dispute one credit report item at a time. Once you receive an updated copy of your credit report showing the outcome of your initial dispute you can start all over again.

Following these steps will offer you the best chance at raising your credit score. It can take a little time, but it's well worth it over the first term of your mortgage if you can save some money. How ever with this point in mind, and the fact that it can take 45-60 days for one dispute to come full circle and be a success or not you should start this process in ample time before you plan on making your purchase.

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