How To Improve Your Credit To Get Approved For a Mortgage
This guide covers how to improve your credit to get approved for a mortgage. How to improve your credit and boosting your credit scores is not difficult, and the team at Gustan Cho Associates can help you. You might be enticed to hire a credit repair service that guarantees to resolve your credit issues for a substantial fee.
Achieving the same or even better results can be accomplished by taking a few simple steps. Whatever a professional credit repair service can do, you can do the same, if not better.
Gustan Cho Associates has countless guides on improving your credit to get approved for a mortgage. The team at Gustan Cho Associates are expert in guiding borrowers on how to improve your credit to qualify for a mortgage. In the following sections, we will cover how to improve your credit to get approved for a mortgage.
How To Improve Your Credit By Regularly Checking Your Credit Scores
To access all your credit scores, you can pay a small fee of $30 and create an account with Experian at Experian.com. By doing so, you can monitor your credit scores and observe how they change over time. Additionally, you can simulate and improve your.
Experian credit scores and easily dispute any errors on your credit report. Different types of debt impact your credit scores. For instance, a car loan exceeding your car’s value won’t harm your credit scores.
Utilizing over 20% of your credit card limit can lower your scores. If you use 64% or more of your credit card limit, your scores may drop by 60 points. Moreover, the credit card company might reduce your limit to match your balance, pushing your usage to 100% and potentially lowering your scores by up to 160 points.
Actions to Take When Your Score Drops Significantly
If your credit score decreases dramatically from 760 to 600 and you don’t have enough funds to reduce your credit card balances below 10% usage, consider the following alternatives:
Cash-Out Car Loan
Contact various credit unions and inquire about cash-out car loans. This type of loan allows you to borrow more than what you owe on your current car loan, and you can use the extra funds to pay off all your credit card balances.
Lending Network, LLC, the consumer, business, and commercial lending platform of Gustan Cho Associates offers car loans at competitive rates and up to a 125% loan-to-value.
Remember to retain all your credit card accounts, as closing them might negatively impact your credit. Given your credit score is 600, you might qualify for a cash-out car loan if the loan-to-value (LTV) ratio remains below 80%.
Research Credit Union Criteria
Contact different credit unions to gather essential information before applying for any loan. Some credit unions have a debt-to-income (DTI) ratio limit of 55%, while others set it at 35%. Look for a credit union with a higher DTI allowance, around 50%, and favorable LTV criteria for cash-out car loans based on your low credit score. Inquire about the credit bureau they utilize, which FICO score they consider, and whether they pull reports from all three credit bureaus.
Comprehend Loan Parameters
Ensure you understand the information you must request from the credit union. Ask about the LTV they offer for your credit score. For example, if your car is valued at $40,000, according to Kelley Blue Book, and you owe $20,000 on your car loan, an 80% LTV loan would provide you with $32,000.
After settling your $20,000 car loan balance, you would have $12,000 remaining to pay off your credit cards. This would likely increase your credit score by 60 points, as your usage would drop from 100% to below 45%.
Most credit cards have interest rates of 30% or higher, with $20,000 in credit card debt and a $600 monthly payment. On the other hand, car loans generally have interest rates below 7.99% with a 60-month term and a $400 payment. This amounts to a monthly savings of $200, accumulating to $2,400 annually.
Apply for Multiple Loans
When applying for a cash-out car loan, you can also consider applying for additional credit cards and personal loans from the same credit union. Utilize these funds to pay off the remaining credit card balances. If the creditor does not budge on removing your late payment, try to get three to five additional secured credit cards with at least a $500 credit limit on each secured card.
If your credit scores plummeted for one reason or another, try contacting the credit bureaus and asking for a one-time forgiveness on the late payment. Bad credit is like a hangover and takes time to fix.
If you unfortunately forgot to make a payment or your credit scores dropped, you must act fast and start rebuilding your credit. Get two credit rebuilder accounts to offset your bad credit with positive credit tradelines. Paying off all your credit balances could increase your credit scores by as much as 140 points. Look for credit unions that offer no-cost auto loans. Car loans are typically easier to obtain and are processed quickly, often within an hour.
Advantages of Credit Unions
Credit unions are owned by their members, focusing more on serving their members rather than generating profits for shareholders. Even if you only have a small account with a credit union, you can benefit from their loans, which come with lower interest rates and more lenient qualification criteria than traditional banks.
Ensure you inform the loan officer that you intend to consolidate your debt and pay off your credit cards, as this will help exclude those payments from your DTI calculation.
By following these tips, you can take charge of improving your credit scores on your own and save lots of money that would otherwise be spent on credit repair services and high credit card interest payments. Remember to be proactive, regularly monitor your credit, and make wise financial decisions to uphold and enhance your creditworthiness.
