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May 01, 2017 How To Buy a House If You Have Credit Issues

Alan Bermudez

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What are the best steps to take when your credit isn’t where it needs to be to get on with your life? Here are a few points to consider:

1. Keep your credit card balances low
Popular opinion is to immediately pay off your credit cards as soon as you put a balance on them. The mentality makes perfect sense since you are proving you are responsible with the money you borrow….right? Wrong! The bureaus want to make sure you are responsible with the money you are borrowing, and want to see that you make regular monthly payments. In fact, the best place to keep your credit card balance is between 20-30% of the limit. This is the quickest way to build positive credit!

2. Pay your bills on time
No new revelation here, however you’d probably be surprised how many people run late on payments. You’d be even more surprised as to how much it affects your credit score! A single late payment has the potential of dropping your scores over 50 points, and it is hard to get back up after a hit like that. Many of my clients pay their bills on time, however their reports claim that they are running late. You might want to call the company reporting and find out when they report to the bureaus to make sure you pay your balance on time.

3. Don’t pay those collections
This might be contrary to everything that you’ve ever heard before, but hear out my argument. Consolidating collection debts might make you feel like you are doing the right thing, but you’ll quickly find out that it hurts you more than it helps. Once you pay off the collection, it doesn’t necessarily remove it from the credit report, in fact, it zeroes out your debt but simultaneously re-ages the debt. What does that mean? That basically means that it updates as a “new” collection, and affects your scores as such.

If you have delinquencies on your credit report that are hindering you from applying for a loan, don’t try to figure it out yourself, hire a professional who specializes in deletions.

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