Improving Your Credit Score
While there are many mortgage programs available for
people with poor credit, it’s always a good idea
to continuously try to improve your credit score, even
if you have already found a mortgage banker willing
to give you a loan. With better credit, you may be able
to trade your high-interest loan for a low-interest
one some time in the future.
It’s a simple fact that people with poor credit
have to spend more money on interest and fees--an unfortunate
truism that often results in being even more stretched
to the limit. For example, a person with poor credit
can usually buy a car, but will end up with monthly
payments as much as double that given a person with
better credit. So the person with good credit benefits
by lower payments, and is better able to manage his
or her finances, while the person with poor credit is
more likely to go into a never-ending spiral of bad
debt simply because a much higher percentage of his
or her income is eaten up by fees and interest.
There’s a difference between bad credit and no
credit, but either way, your score may be inadequate.
Bad credit is more difficult to fix; having no credit
is a simple matter to remedy. Start by applying for
department store credit cards or low-credit-limit major
charge cards. Buying a car on credit is also much easier
than buying a house, so this is also a good way to start
the process of gaining good credit references.
Of course, the most obvious no-brainer piece of advice
is to pay your bills on time. Almost everyone has faced
a situation where this is simply not possible, but focus
on the present. You can’t do anything about the
late payments you’ve already made, but each late
payment you continue to make results in additional points
against you. Don’t get discouraged because your
credit history reflects multiple late payments. Instead,
focus on not accruing any more delinquencies in the
future so that you do not make your credit worse than
it already is.
A reasonable banker (and there are some out there)
will give more weight to your more recent credit patterns.
He/she may make a judgment call in your favor if, for
example, you had a lot of late payments in the past,
but have been paying everything on time for the past
year. An unreasonable banker that does not take this
into consideration is not worthy of your business.