3 Simple Tips for a First Time Homebuyer with Bad Credit Roger Odoardi If you’re a first time homebuyer with bad credit, you will without a doubt encounter more stumbling blocks than someone with a perfect credit score — that’s just the nature of the home buying business. But don’t be deterred. Your credit issues shouldn’t prevent you from buying your first home. Generally, a first time homebuyer with a higher credit score will have a better shot at securing a mortgage loan with a low interest rate — meaning lower monthly payments. A first time homebuyer with bad credit, however, will experience difficulty securing that low interest rate — among other things — and will likely incur higher monthly payments. Some experts suggest a lender will likely have no problem approving a mortgage with the lowest interest rate to a borrower with a credit score of 740 or higher, but may think twice about giving a first time homebuyer a mortgage loan if their credit scores are under 620. But before you get bent out of shape about your credit score and how it might impact you purchasing your first home, remember that you are in control of your own destiny. If you’ve got bad credit now, that doesn’t mean it has to stay that way. A first time homebuyer who works to repair their bad credit prior to starting the loan process will have a much easier time all around. Here are 3 tips to help you start to improve your credit score now! Get to know your credit history The ability to understand and analyze your credit history can go a long way toward improving your overall credit score. A first time homebuyer with bad credit should get a copy of their credit report and go through it with a fine tooth-comb. Who knows? There may be several questionable items on your credit report that could prevent you from getting that loan. While realtors and lenders alike recommend doing this before buying a home, the fact of the matter is that this is a good idea for anyone with questionable credit. (HELPFUL HINT: If you don’t know how, you can receive a free copy of your credit report each year from each of the three major credit reporting agencies – Equifax, Experian, and TransUnion – by clicking here.) Pay off your debts While it may seem counterproductive to begin spending money while in the middle of trying to buy a house, paying off your debt prior to doing so is of utmost importance. This is perhaps one of the most surefire ways of improving your credit score. As an example, paying down the balance of your credit cards can help reduce your credit ratio, which can then positively impact your credit score. Similarly, if you have collections or judgments against you, now may be the best time to begin paying them off as quickly as possible. (HELPFUL HINT: Paying off your credit card is a good thing, closing your credit card account is not. Resist any urge to close an account when you’ve paid it off; instead think about putting the card somewhere out of sight and out of mind.) Don’t be late on paying your bills Now more than ever, it is important to pay your bills on time and, when possible, in full. This applies not only to your credit cards and car payments, but also those medical and utility bills. While this may not necessarily boost your credit, it’s important to keep a good credit profile before and during the home buying process. Experts suggest that a single 30-day late payment can knock 100 points off your score, and it can take many, many months to recover. (HELPFUL HINT: A good tool to ensure you’re paying your bills on time is to set up an automatic payment option.) When working with a potential client, a mortgage broker will be able to recognize pretty early on if a homebuyer is in need of a credit boost. At Blue Water Mortgage, our team of skilled brokers can help a first time homebuyer with bad credit recognize the situation they’re in and then immediately begin taking steps to repair it. Increasing your credit score is one of many recommendations included on our Pre-qualication Checklist. Contact us today! Roger Odoardi Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.