How Down Payments Affect Rates and Mortgage Loan Insurance When Buying a Home

If you suffer from poor credit, you can raise your score a lot in just a month. If you do it right, it is not unusual to see a 600-credit score jump by 100 points. Here is how to do it so you can get the most competitive home loan interest rate.

Get Your Free Report and FICO Score

Before you can work on your credit, you need to review your credit report carefully. Also find out your FICO score with each bureau. Get your free credit report once per year at www.annualcreditreport.com. Free scores are also available at Credit Karma.

Identify Any Negatives

Look for any accounts that have a negative payment history. You also need to look for any late payments and inquiries on your credit. Be sure your personal data is correct as this matter: You address, employer and phone number.

Pay Down Credit Card Balances

The fastest way to increase your score is to pay down your credit card balances. Keeping your ratio under 15% will give you a major bump in score. It is reported that credit utilization can affect your score by 30%. So save up your money, work more, and pay down your debt.

If you can, pay your cards down to zero. This will maximize your credit score.

Talk to Collection Agencies

If you have any collection accounts with small balances, you should call the collection agency. Do NOT simply pay the balance without calling them. You should tell them on the phone that you want to pay for a delete. This means you are paying the amount that is owed and they will remove the negative account from your report. Be sure that they really do remove the negative mark; write down the name and number of the person you speak with.

You also should have 'pay for delete' letters in writing from each collection agency. This shows that they agree to remove the account from your report in full if you pay the amount stated. In some cases, you might be able to settle your account for less than you owe.

Don't Pay the Collection If They Won't Remove It

Not paying a debt on purpose, even if it's thousands of dollars, sounds odd to some. But if you have a collection account with a significant balance and the company refuses to take it off your credit report if you pay it, don't pay it.

If the creditor says they will report it as a paid debt but cannot remove it, do not pay. It will not boost your score.

It does not help your score to have collection accounts on your report with zero balances. They need to be removed completely for your score to rise.

Dispute Negative Marks on Your Credit

The credit bureau has a month from the date they get a dispute request to finish their investigation. If the creditor is unable to verify if the account or late payment is accurate, they will delete it.

Some people can get 10 or 15 accounts deleted simply by disputing them. This can really increase their score.

Get Late Payments Removed

If you have a late payment with the original creditor, you should be aware that a Goodwill letter is no longer effective. It is against the agreement that major credit bureaus have with creditors to take a negative item off as a matter of good will. The item must be incorrect, or they may not remove it.

A better idea is to contact the particular creditor and tell them you think the late payment is not right. They may have their credit reporting team look into it, and they may remove it for you.

Some creditors have success by just asking the original creditor to remove the late payment from their credit report. If that does not work, you can always start a dispute with the three major credit reporting companies.

By using the above simple tips, you can raise your score easily by 100 points over a few months. Then you will be in line for the best possible interest rate on your home loan.