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How to rebuild your credit if you are looking for a bad credit mortgage


How to rebuild your credit if you are looking for a bad credit mortgage

Rebuilding your credit can be difficult even more difficult than when you are starting from the beginning. It requires proving to lenders that although you have some faults in your report, you can make future repayments without delays. Before you start rebuilding, you should first get a credit score report, which should show you the direction to go. It enables you determine the kind of goals to set for yourself. You need to thoroughly go through the report to make sure there are no errors which might be holding you back.  Go through the addresses that you do not know, amounts and accounts. Correcting a mistake in your report can add points to your score and if you have been a victim of identity theft, this will help a lot. If you identify any error, dispute it.

There are strategies to use so you can rebuild your credit. They are listed below.

Make timely repayment

Make sure you pay all your bills and clear any existing lines of credit on time. Your payment history is one of the major things that can have a big effect on your credit score. Do not miss a payment while rebuilding your credit, moreover late payments on your reports can stay up to seven years, thus it is more difficult to recover from them like the others.

Do not use up all of your credit limits

Ensure you do not use up all of your credit limit as it has a big effect on your credit score. Experts recommend that you do not use more than 30% of the limit on your credit card. Staying below 30% would do a lot on your credit score, so that should be your target and once you bring down your balances, the credit card issuer will report to that to the credit bureaus who in turn will increase your credit scores.

 Obtain a secured credit card

If you are planning to start building your credit from the scratch, you might need to start with a secured credit card as it is backed up by a cash deposit you have to make upfront. The deposit you make will be the same as your credit limit. You can make use of it just like other cards to buy things.  Secured credit cards are used to build your credit so you can qualify for unsecured cards. An unsecured card refers to a card without a deposit and cones with better benefits. After choosing a secured card with low annual fee, ensure it reports to the three credit bureaus- Experian, Equifax and TransUnion.

Having a closed credit card accounts may require you to start over with a secured credit card, but they require a deposit upfront which is typically your credit limit, although they function like other credit cards. Choose one from an issuer that reports payments to all three major credit-reporting bureaus.

 Get a secured loan or credit-builder loan

Secured loan and credit builder loan are provided to help you rebuild your credit and they are easily accessible in credit union or community bank, but to get hat, you need to be a customer or a member and you will be required to provide a proof of income as well as proof that you will be able to repay. The lender holds the money while you repay and gives it back to you after you have made the repayment.

If you have some money on deposit, you can borrow against it with a share- or certificate-backed loan. This type of secured loan is backed by the money you have in your savings, your CD accountor the money market. Some usually place a hold on the money until you repay what you borrowed, while the others release the money in bits as you clear the balance.  They usually report your payment to the credit bureau to ensure you make timely repayments, and a late payment will damage your credit.

Avoid applying for a new credit

There could be some temptation to open a new credit card especially when a store offers you some discount on your purchase for doing so. Whenever you apply for a credit, it gets listed on your report as “hard inquiry”, so when you apply for too many, it adversely affects your credit score. If you have a good credit score, you can apply for credit a few more times in each year before it starts affecting your score, but with a below-average score, it is different as it will have a negative effect on your score.[/vc_column_text][/vc_column][/vc_row][vc_row el_class=”seo-link-sec”][vc_column][vc_empty_space height=”50px”][vc_column_text][slick-slider category=”28″ design=”design-5″ speed=”2000″][/vc_column_text][/vc_column][/vc_row][vc_row el_class=”call-out-sec stretch-sec” css=”.vc_custom_1568018042545{background: rgba(0,0,0,0.88) url( !important;background-position: center !important;background-repeat: no-repeat !important;background-size: cover !important;*background-color: rgb(0,0,0) !important;}”][vc_column][vc_column_text]

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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