If you want to buy a home the best thing you can possible do is repair your credit first. There is no escaping the fact that with bad credit it will be difficult to buy a house.
It’s possible to buy a home with poor credit, but you are going to have to either explore some of the more exotic home buying strategies explained in that link or you are going to pay more money. Either way, it’s far easier and less of a hassle to just repair your credit first. You’ll find it’s a LOT easier to buy a house once your credit score issues are taken care of.
Few things can have more devastating long term consequences than a bad credit record. Whether you’re applying for a job, trying to rent an apartment, seeking approval for a loan, or negotiating to purchase a home, a poor credit record can ruin your chances of achieving your goals.
In the best possible world, you would manage never to damage your credit in the first place. In the real world, people often have situations that get beyond their control and they end up with a less than stellar credit report. This situation may seem hopeless at first, but that’s not the case at all. It will take time and dedication, but it is indeed possible to repair a bad credit record.
The Most Important Steps to Repair Your Credit
Short of complete bankruptcy, the most damaging thing you can do to your credit history is to pay bills late, or worse, not pay them at all. A single 30 day late mark on a payment from three years ago may be enough bad news about you that the bank won’t give you that house mortgage you desperately need. This may seem like an overreaction on the bank’s part, but that’s the way business is done in the United States these days.
To repair your credit history, therefore, primarily involves paying your bills and paying them on time. This will be difficult at first, particularly if you’ve ended up overextended. Here are some tips to making sure you can pay your bills fully and on time:
Step 1: Make paying your bills your top financial priority. Give up purchasing items which are discretionary. This includes entertainment, purchases that can be delayed such as new clothes, and eating out. Even when grocery shopping, change your usual buying habits and look for bargains. Buy and eat what’s on sale instead of what you might prefer. Don’t worry if this seems like a large imposition – it won’t last forever, just until you get your financial house in order.
Step 2:Don’t wait until bills are almost due to pay them. That’s almost a recipe for disaster. If you have a personal emergency and can’t get to the post office, or if you forget, you’ll end up with a late payment notice on your credit history. This can undo all your hard work you’ve done to repair your credit history.
Step 3:If your bills are simply beyond your ability to pay them, don’t ignore the problem. That will only make things worse. Solve the problem instead by contacting your creditors and negotiating a different payment schedule with them. Most creditors will be happy to work with you, because the alternative can be that they won’t get their money at all. They’d rather get it on a slower schedule than end up getting stiffed.
Step 4:Avoid at all costs taking on any additional debt. Close your credit card accounts as soon as they are paid off. If possible, close them even before then; some creditors will allow you to close off future activity on your card even though it is technically still an account in existence since you are paying it off.