Five Credit History Boo-Boos and How to Fix Them

Guest Author: Calum MacKenzie

With lenders tightening up their mortgage restrictions all around the country, a clean credit report is going to be more important than ever. If you’re thinking of buying and will need a mortgage, the time to start thinking about your credit is well before you make your mortgage application. That will give you time to fix it up. These are five of the most common credit boo-boos and the quickest way to fix them.

1) Not knowing what the credit reporting agencies know. Seriously, it’s important to keep an eye on your credit report. You’d be amazed how often errors make their way into those files. You’re entitled to order your credit report for free once a year from each of the three major credit reporting agencies. You can’t fix something if you don’t know it’s there.

Fix: Get your credit reports and check them over carefully.

2) Not enough credit history. Your credit report can be TOO clean. If you’ve never held a credit card or taken out a loan of any kind, the lenders have no way to judge how you’ll handle paying your bills. Sometimes, they’ll turn to your utility payments, but more often than not, they’ll just say no.

Fix: Get a credit card or take out a personal loan and pay it off promptly and on time. Depending on other parts of your life – job and residential stability, specifically – it could take as little as four to six months to fix this one.

3) Late payments on your accounts. The effect that late payments have on your credit report/score depends on how long ago they happened and how often your payments are late.

Fix: Time and money is the only thing that will fix this one. Make payments on all of your accounts on time. For best results, get at least a year of on time payments behind you before you apply for a mortgage.

4) Not communicating with creditors. Communication is one of your most potent tools in any situation. When it comes to your credit, it’s vital. When your creditors don’t hear from you, they’ll assume the worst. A telephone call to make payment arrangements – BEFORE the due date on your bill – can be all it takes to avoid a black mark on your credit report.

Fix: Pick up the phone and call!

5) Maxing out your credit cards. Creditors look at more than whether you pay your bills and when. They also look at how much you owe in relation to how much credit you have available. Carrying big balances on your credit cards and revolving loans will bring your credit score down.

Fix: Pay down balances on all of your credit cards and loans. At very least keep them to less than half of your available credit.

6) It is possible to fix your credit. However many of these are not “quick fixes”. It’s even better to keep your credit clean in the first place. Beware of an ever increasing number of companies out there that claim to be able to “fix” your credit.

For more information on fixing your credit score read The Credit Fixer Upper.

Calum MacKenzie is Broker-Owner of Real Living Southern Homes, a top residential real estate company serving the Wesley Chapel real estate and Land O' Lakes real estate markets.