Improve Your Credit Score for a Home Loan

Four quick ways you can start repairing your credit score to qualify for a home equity loan

When you apply for a home equity loan, the lender will look closely at your current financial situation, the equity you've accumulated in your home, your debt-to-income ratio, and your credit score. Even if you've got enough equity and your finances otherwise check out, a poor credit score could still prevent your approval. To avoid this, learn how to improve your credit score for a home loan.

1. Get your free credit report

Start by reviewing your credit report, which you can do for free once per year. This will help you identify any problems you have to fix as well as simple mistakes that can be remedied, such as incorrect or mixed up information reported from creditors. It's not uncommon to find errors; the three major credit bureaus don't include the same elements in their reports. Additionally, the information that ends up in your credit report isn't checked for accuracy. You're the only one looking out for you, so be sure you take advantage of this. You can then follow up with the appropriate institutions to correct issues.

2. Look for ways to add good credit information to your report

Believe it or not, not all creditors will report on your payment history. This is a question to ask when you apply for a new loan or credit card. If you find that your positive, on-time payment history isn't appropriately reflected on your credit report, call that creditor and ask if they can submit the information.

If your credit report is primarily a collection of loans and you've never really been a credit card person, consider opening one. You can apply for a card with a low limit and low interest rates. Using it sparingly and responsibly goes a long way toward improving your credit score. It shows potential future creditors and lenders that you can manage your money well and don't spend more than you can afford.

3. Next, correct the easy-to-fix problems.

This is the fastest way to go about repairing your credit score. Should you spot incorrect information, immediately contact the credit bureau as well as the creditor to whom the incorrect information is tied. The sooner you get that remedied the better. It will also help if you have receipts or bank statements to support your claims. That will expedite the process and increase the likelihood that your credit report will be repaired.

4. Create a plan to repair the actual damage.

If your credit report reflects problems like delinquent accounts, defaulted loans, bankruptcies or other issues, the only way to improve your credit score is to improve your money management skills. You can't have those blemishes removed from the report, but you can practice better skills in the future that will result in positive additions.

Call those creditors who show you as delinquent and arrange a payment plan that fits your budget. Continuing to put off payments will only continue to hurt your score. See if you can adjust the size of the payments you owe or even just the due dates.

If you're struggling to pay back loans, call the lenders and ask about alternative payment schedules. If you can stretch your payments out over more years, that will lower the amount you owe each month. While this will mean you pay more in interest in the long-run, it will help you stay current on your bills now, which is the fastest way to go about repairing your credit score.

Finally, consider closing credit cards that are giving you trouble. First, you'll have to pay them off. But, if you have a lot of store credit cards that you use occasionally and then forget to pay, that's only hurting you. While on a credit report it may look good to have a lot of available but unused credit, you can have too much credit. And, if you're not handling that credit well, it could be hurting you.

Apply for a home equity loan with Citizens Bank

You'll need a quality credit score to buy a home or take out a home equity loan, so take the necessary steps to monitor your credit report and fix any problems now. Then, start exploring your home equity loan options. Citizens Bank offers competitive rates on home equity loans as well as home equity lines of credit. You can start the application process online by completing a short contact form, and a Home Loan Originator will be in touch to help you apply.

This page is intended for general information purposes only. Individual credit situations vary. For questions specific to your situation contact one of the three major credit bureaus: Equifax, Experian or TransUnion.

 

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