Credit Repair Advice for New House Hunters

August 18, 2024

The best credit advice for house hunters involves giving yourself plenty of prep time to improve your FICO scores and history of on-time payments. But what else do you need to know about fixing your credit before you apply for a mortgage? We examine some important issues below.

Understanding Credit Reports and Scores

To make the most of your credit repair journey, it's crucial to understand how credit reporting works. 

The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission (FTC), governs the collection and use of credit information. Credit reports, compiled by credit bureaus like Equifax, Experian, and TransUnion, contain detailed records of your credit history. The information in your credit files includes:

• Personally Identifiable Information such as your name, address, Social Security number, and date of birth.
• Credit accounts to include info about your credit cards, loans, and mortgages.
• Public records on applicable bankruptcies, foreclosures, and tax liens.
• Credit Inquiries to determine who has accessed your credit report.

FICO scores are “numerical representations of your creditworthiness” based on the details in your credit reports. Lenders use these scores in the process of determining your creditworthiness and the risk of lending money to you.

Review Your Credit Report for Common Errors

Errors in credit reports will hurt your chances of home loan approval. Review your credit reports to make sure none of the following are present:

• Incorrect personal data, including errors in your name, address, or Social Security number.
• Filing errors to include information from someone else's credit report appearing on yours.
• Duplication such as one debt listed multiple times.
• Inaccurate account information such as credit accounts listed as open when they are closed, or vice versa, listings of “late payments” actually made on time.

Dispute Errors on Your Credit Report as Early as Possible

The dispute process typically takes much longer than some consumers suspect. Give yourself plenty of time to do the following steps:

• Pull Credit Reports for Free
  Request a free copy of your credit report from each of the three major credit bureaus annually at AnnualCreditReport.com.
• Identify Credit Report Issues
  Review your credit reports for any inaccuracies.
• Disputes
  You must coordinate with each credit bureau and the company that furnished the incorrect credit report data. You will be expected to offer supporting documentation, such as payment records or account statements.
• Investigation
  Credit bureaus typically take 30 days (on paper) to complete an investigation but don’t expect the issues to be resolved within that time frame. It may require further effort.

Building Positive Credit History

While disputing errors is important for some, building a positive credit history is important for any long-term credit repair. 

• Make on-time payments for at least 12 months before home loan application time
• Keep credit use to a minimum before application day
• Consider using a mix of credit options
• Consider secured credit cards if you have a limited credit history or poor credit.

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