Don’t let anyone fool you into thinking you need to hire a professional to repair your credit. The truth is, there is nothing a credit repair company can do to improve your credit that you can’t do for yourself. So, save yourself some money and the hassle of finding a reputable company and repair your credit yourself.

If you’ve run into financial difficulty that resulted in damaged credit, you might find it hard to obtain new credit. Past credit mistakes can be nearly impossible to move past, especially when new creditors and lenders are unwilling to give you a second chance. What do you do when you need to re-establish your credit, but can’t get a credit card? You get a secured credit card.

What is a secured credit card?

A secured credit card operates just like a regular credit card. The major difference is that you, the cardholder, are required to make a deposit against the credit limit on the account. This creditor uses the deposit as security in case you default on credit card payments. The credit limit on a secured credit card is usually 50% to 100% of the deposit you make. For example, if you make a $500 deposit for a secured card, your credit limit will be between $250 and $500.

Check your credit reports

When you make your application, the mortgage lender look for three main things: a steady income, a down payment, and a solid credit history. Checking your credit report will let you see if there’s anything that’s hurting your credit. You never know which credit report the bank will pull, so check all three of them. You can get a free copy of all three credit reports at AnnualCreditReport.com.

 

Before You Apply for a Mortgage

 

The credit crisis has made it more difficult to get approved for a mortgage loan. It’s more important than ever to prepare your credit for a mortgage application. Cleaning up your credit report and increasing your credit score will improve your chances of getting approved. If your credit’s already good, maintaining it will be key in locking in a low interest rate.

1.) Check your credit reports

When you make your application, the mortgage lender look for three main things: a steady income, a down payment, and a solid credit history. Checking your credit report will let you see if there’s anything that’s hurting your credit. You never know which credit report the bank will pull, so check all three of them. You can get a free copy of all three credit reports at AnnualCreditReport.com.

2.) Dispute inaccurate information

Misinformation can hurt your credit score and get your application denied . Get rid of any inaccurate information by disputing it with the credit bureau. If you have proof of the mistake, providing it will help ensure the mistake is removed from your report.

3.) Pay off delinquent accounts - late accounts, charge-offs, collections, judgments

Mortgage lenders need to be convinced that you’ll make your payments on time. Outstanding delinquencies will kill your chances of getting a mortgage. Pay off all accounts that are currently delinquent before putting in a mortgage application.

4.) Bury delinquencies with timely payments

You need to establish a pattern of timely payments to get approved for a mortgage and get a competitive interest rate. If you have a recent late paymentw - or you've just paid off some delinquencies - ait at least six months before applying for a mortgage. The older the delinquency, the better your credit looks.

5.) Reduce your debt-to-income ratio

Your mortgage underwriter will question your ability to make your mortgage payments if you have a high level of debt relative to your income. Bring your debt to at most 36% of your income – the lower, the better.

6.) Check your FICO score

Order all three of your FICO scores from myFICO.com to get an idea of where your credit stands. Your FICO score should be at least 720 to get good interest rate on a loan. If your score is lower than that, read through the included analysis to find out what’s bringing your score down.

7.) Don't incur any new debt

Taking on new debt makes a mortgage lender suspicious of your financial stability – even if your debt level stays below 36% of your income. It’s best to stay away from any new credit-based transactions until after you’ve gotten your mortgage. That includes applying for credit cards, especially since credit inquiries affect your credit score.