5 Ways to Get a Larger Mortgage

 Learn how to get a larger mortgage and buy a house you thought you couldn’t afford.
 
GoBankingRates.com | The process to buy a home is exciting but takes time, research and money. And larger mortgages or mortgages with better rates usually require a high credit score and high income, too. If your credit history or income isn’t up to what most lenders deem acceptable for a home loan, however, it’s time to explore your options.
 

Rebuilding your credit is one way to improve your chances of qualifying for a large mortgage loan, but it can take some time to accomplish. There are several easier alternatives to help you figure out how to buy a house with a large mortgage when you don’t meet certain mortgage requirements.

happy couple meeting real estate
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How to Get a Larger Mortgage Even If Your Income Is Low

Before you even start the preapproval for mortgage process, use a mortgage qualification calculator to figure out how much you can afford. Many lenders advise not to spend more than 28 percent of your income on your mortgage.

Here are five ways you can get a large mortgage with low income:

1. Increase Your Qualifying Income

When underwriters look at income, they take a pretty conservative stance. For example, income from your part-time job might not be considered unless you have a history of working more than one job. And if you deduct unreimbursed business expenses on a Schedule 2106, your lender will probably also deduct them from your qualifying income.

However, sometimes the rules work in your favor. Per the Equal Opportunity Act Amendments of 1976, you can use income that you receive from public assistance programs to qualify for a loan if the income will likely continue for three years or more.

Here are other sources of income that you might not have considered:

  • Alimony or child support
  • Automobile allowance
  • Boarder income
  • Capital gains income
  • Disability income — long term
  • Employment offers or contracts
  • Employment-related assets as qualifying income
  • Foreign income
  • Foster-care income
  • Interest and dividends income
  • Mortgage credit certificates
  • Mortgage differential payments income
  • Non-occupant borrower income
  • Notes receivable income
  • Public assistance income
  • Retirement, government annuity and pension income
  • Royalty payment income
  • Social Security income
  • Temporary leave income
  • Tip income
  • Trust income
  • Unemployment benefits income
  • VA benefits income
woman signing paperwork filling document
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2. Choose a Different Mortgage

Some mortgages have more forgiving guidelines than others when it comes to income. VA loans, for example, calculate income two ways: the standard debt-to-income method and the “residual income” method, which is much more generous.

For people with lower incomes, a worthwhile option is Freddie Mac’s Home Possible program. To qualify, you must have a yearly income that’s either equivalent to or less than the area median income for the census tract in which the property is located. The only exception to this rule is if the property is in a designated underserved or high-cost area.

The Home Possible rules state that if the property is in a high-cost area, your annual income can exceed the AMI within certain limits. If the property is in an underserved area, the AMI requirements don’t apply at all.

An FHA loan might be another option to buy your dream home if you have a history of paying your bills on time, even if you experienced a period of financial hardship. FHA loan qualifications state that you might still be able to qualify for a loan, regardless of isolated cases of late or slow payments.

happy young couple making deal with realtor
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3. Bring in a Co-Borrower

If you’re still wondering how to get approved for a higher mortgage loan, you can bring in a co-borrower — that extra income and equity will likely enable you to qualify for your home. Co-borrowers can be occupants or non-occupants. An occupying co-borrower lives in the home with you. A non-occupant co-borrower is more like a co-signer. This person doesn’t live in the house but is responsible for the payments.

Lenders are more likely to put restrictions on non-occupant co-borrower loans, such as requiring a higher down payment. Government loans typically come with fewer restrictions.

For manually underwritten loans, the income from a non-occupant co-borrower might be considered as acceptable qualifying income. This income can offset certain weaknesses that might be in the occupant borrower’s loan application, such as limited financial reserves or limited credit history.

woman working on computer and writing down her thoughts
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4. Get a Subprime Mortgage

The term “subprime mortgage” has a negative connotation because of the housing bubble and financial crisis it’s often associated with, but subprime mortgages can actually be a gateway to home ownership for some people.

A subprime mortgage is a home loan with higher interest rates than their prime mortgage counterparts. The higher interest rates are in place to offset the risk of loan default by subprime mortgage borrowers who are risky customers because of poor credit. These mortgages can be either fixed or adjustable.

The benefit of a subprime mortgage is that people with poor credit don’t have to wait as long to own a home. They can repair their credit by paying their mortgage each month, rather than waiting years to repair their credit and then buy a home.

The obvious disadvantage, besides higher rates, is that closing costs and fees associated with home loans will be usually higher for subprime borrowers. Although credit scorerequirements aren’t as stringent for subprime loans, borrowers must still show proof that they can afford the mortgage payments each month.

 
credit report on a digital tablet with paperwork.
Courtney Keating / iStock.com

5. Strengthen Your Application

It might surprise you to know that income is actually one of the least important underwriting criteria. If you don’t believe it, try calling a few lenders. Tell them you make $1 million a year, but have a 500 FICO score and only 5 percent to put down. You will not get far.

However, people with low-to-moderate incomes get mortgages all the time, especially when they have excellent credit, a decent down payment and money in the bank. Some of the first few steps to buying a house are to establish great credit and substantial savings. It helps to have an emergency fund — enough in the bank to cover two to six months’ worth of bills — and a credit score of 720 or better.

Other compensating factors include low debt, additional savings, a secure job with excellent prospects and documenting extra “unofficial” income. Even if you know you can’t “officially” count some kinds of income, it’s smart to document its existence anyway.

Thank you to Barri Segal for writing this article.

What’s Your Home Buying Power?

If you’re in the market for a new home or investment property, one of the first questions you’ll probably ask is, “What can we afford?” Many buyers become so caught up in how much they can afford that they don’t realize their total buying power—that is, the total amount of purchasing potential they actually have.

Buying Power Defined

Your buying power is comprised of the total amount of money you have available each month for a mortgage payment. This means the money you have each month after fixed bills and expenses. Any money you’ve saved for a down payment, the proceeds from the sale of your current home, if applicable, and the amount of money you’re qualified to borrow all impact your buying power as well. When you take all of this into account, you may find you are able to purchase a larger home or a home in a more desirable neighborhood, or you might realize you should be looking for homes in a lower price range.

What About Housing Affordability?

Housing affordability is a metric used by real estate experts to assess whether or not the average family earning an average wage could qualify for a mortgage on the average home.1 Although this figure is essential to creating a comprehensive overview of the real estate market, it’s not a factor you should consider in your home search. What may be considered affordable to you based on your income and other factors may be different than what’s affordable to the average buyer.

Why Buying Power Matters

A common misunderstanding is that a home’s list price determines whether or not you can purchase it. Although it’s important to look at the price tag, it’s essential to consider what your monthly payment will be if you own the home. After all, the purchase price doesn’t include the housing-related expenses, such as annual property taxes, homeowner insurance, associated monthly fees and any maintenance or repairs. Figuring out the payment will prevent you from overestimating or underestimating your buying power. After all, you’ll live with your monthly payment, not the sales price.

Once you have clarity on your buying power, you’ll be able to buy the home you want, instead of settling for a home because you feel it’s the only one you can afford. It will also prevent you from becoming “house poor,” a common term for someone who’s put all their money toward the down payment, leaving them nothing left over for fees outside of their monthly house payment. Both scenarios can negatively impact the lifestyle you want to live. Understanding your buying power can help you get the home you want without sacrificing the lifestyle you desire.

If you haven’t sold your current home yet, a Comparative Market Assessment (CMA) will give you a general idea of how much you may get for your home based on what other homes have sold for in your area. Contact our team for a FREE CMA!

Calculating Your Buying Power

You might be wondering, “How do I know what my buying power is?” Buying power is calculated by adding the money you’ve saved for a down payment and/or the money you made from selling your home (minus fees and mortgage payoff) to all of your sources of income and investments that could be used to make your monthly payment. Make sure to include your monthly pay, commissions or tips, dividends from investments, payments from rental properties or other monthly income you receive as well as the loan amount you’re willing to finance and qualify for.

Most lenders advised buyers to spend no more than 35 to 45 percent of their pretax income on housing, meaning all your income and sources of revenue prior to paying taxes. Make sure you factor in not only your mortgage payment, but also property tax and home insurance to the cost of housing.2 However, other financial experts advise spending no more than a very conservative 25 percent of your after-tax income on your housing expenses.2 Whether you plan to spend the average, play it conservative or split the difference is up to you.

Traditionally, mortgage lenders have targeted the ideal housing expense amount to be a ratio of 28 percent or less.3

However, these figures bring up an important point: you don’t have to spend all of your savings and available monthly income on a mortgage payment. It’s important to set money aside for regular home maintenance, unexpected repairs and monthly fees, such as a condominium or homeowners association fee. While the above ratios are commonly accepted, a lender will look at your total financial picture when they decide how much they’re willing to lend. It may be tempting to take out a large loan in order to purchase the home of your dreams, but keep in mind the less money you have to borrow, the stronger your buying power may be.

4 Things That Impact Buying Power

  1. Credit score. A great score can help you lock into a lower interest rate.
  2. Debt-to-income ratio. The lower the ratio, the better risk you may be to lenders as long as you have an established credit history.
  3. Assets, including the documentation of where the money for the purchase is coming from and the mix of your investments.
  4. Down payment. The more you’re able to put down, the less you will have to borrow. With a down payment of 20 percent or more, you won’t have to purchase private mortgage insurance (PMI) and you may also be able to negotiate a lower interest rate.

How to Save for a Down Payment

If you’re thinking of buying a home one day, one of the first steps to take is to start saving for a down payment. Here are some tips to make saving easier.

First-time buyers:

  1. Set a savings goal. One way to figure out how much to save is to use the average sales price for homes that are similar to what you want and figure out your target down payment percentage. For example, if homes are selling for $200,000 in your area and you want to put 20 percent down, you’ll have to save $40,000. Set a goal to save that amount within a specific time frame; just keep in mind the longer you save, the more the average selling price will change. Although the majority of buyers saved for six months or less, 29 percent of all buyers (and 31 percent of first-time buyers) saved for more than two years for a down payment.4
  2. Cut back on expenses. Review your monthly expenses and look for ways to save. Twenty-nine percent of buyers cut spending on non-essentials items and 22 percent cut spending on entertainment while they were saving for a home.4 Think about items you can live without or cut back on temporarily while you’re saving.
  3. Look for ways to boost your income. Get a side job or sell items online or at a garage sale to increase your income in a short amount of time. Be sure to save any windfalls you get, including your annual income tax refund or work bonuses.
  4. Check out home-buying programs. Your state, county or local government may offer special programs, such as grants, for first-time buyers to use.
  5. Ask your family. Thirteen percent of all buyers, and 24 percent of first-time buyers, were given money from family or friends to use toward the down payment of their home.4

Repeat buyers:

More than 52 percent of repeat buyers used the proceeds from the sale of their primary residence toward the down payment on their next home.4 Similarly, 76 percent tapped into their savings accounts.4 If you’re thinking of buying another home, here are more ways to save more money, in addition to the tips listed above:

  1. Rent a room. If you have an income flat (or mother-in-law unit) attached to your home, rent it out and channel the income into a high-interest savings account.
  2. Make your money work for you. If you don’t plan to buy for at least five years, invest it and let the compound interest work for you. Discuss this option with your financial planner or broker to see if this is ideal for you and your goals.
  3. Tap into your 401(k). If you have a 401(k) plan, you may be allowed to borrow a portion of it, the lessor of up to $50,000 or half of its value, for your down payment. Remember, it’s a loan so you’ll have to pay it back. If you leave or lose your job before you’ve repaid the loan, you’ll have between 60 to 90 days to repay the balance or face stiff taxes and penalties.

If you want to buy an investment property

Whether you’re buying a second home or a rental property, here are a couple tips to save for a down payment.

  1. Tap into your equity. If you’ve paid off or paid down your mortgage on your primary home, you may be able to tap into your equity to purchase another property. Contact your lender to learn more about a HELOC or home equity loan.
  2. Get a partner. Find a friend or relative who’s willing to purchase property with you. Typically, you’ll split the costs and profits equally. Just make sure to work with an attorney to create a partnership agreement to fit your situation.

Work Out Your Buying Potential

What’s your buying potential? Fill out this worksheet to get an estimate.

Housing Expense Ratio:

1. Monthly income before taxes

$

2. Multiply line 1 by 0.28

X 0.28

3. Monthly mortgage payment (PITI) should not exceed this amount

= $

4. Monthly income before taxes

$

5. Multiply line 4 by 0.36

X 0.36

6. Total monthly payments on all debts (including mortgage) should not exceed this amount

= $

7. Subtract the total monthly payments on all outstanding debts (e.g., car loans, credit cards, student loans, etc.)

– $

8. The monthly mortgage payment should not exceed this amount

$

9. Look at line 3 and line 8. The lower figure is an estimate of the maximum mortgage payment in consideration of your income and debts.

$

10. Multiply line 9 by 0.80

X 0.80

11. This equals portion of your mortgage payment that is the principal and interest only

$

12. Use the table below to see the size of the loan you may be able to obtain with this monthly mortgage payment.

 

Source: Iowa State University Extension, What is your house-buying power?

Monthly Payment on 30-Year Fixed Rate Mortgage

Loan amount

3%

3.5%

4%

4.5%

5%

5.5%

6%

$50,000

211

225

239

253

268

284

300

$75,000

316

337

358

380

402

426

450

$100,000

421

449

477

506

536

568

600

$150,000

632

674

716

759

804

852

900

$200,000

842

898

954

1012

1072

1136

1200

$250,000

1052

1123

1193

1265

1340

1420

1500

$300,000

1263

1347

1431

1518

1608

1704

1800

Didn’t see your desired loan amount? Use the table below to estimate your monthly payment (principal and interest) per $1,000 of your loan. To figure out an estimated loan payment, multiply the factor by the number of thousands in the amount of your mortgage.

For example, if you intend to borrow $400,000, with a loan term of 30 years at 4% interest, multiply 4.77x 400 = $1908 per month.

Interest Rate

15-Year Term

30-Year Term

 

Monthly Payment

Monthly Payment

3%

6.90

4.21

3.5%

7.14

4.49

4%

7.39

4.77

4.5%

7.64

5.06

5%

7.90

5.36

5.5%

8.18

5.68

6%

8.44

6.00

Source: HSH.com http://www.hsh.com/mopaytable-print.html)

Don’t forget to factor in property taxes and insurance. These are often added to your principal and interest of your mortgage payment—the money used to pay down the balance of your loan and the charge for borrowing the money. Since these numbers vary, contact your county assessor’s office for the current property tax rate and your insurer for a home insurance quote. Once you have these figures, divide each by 12 to estimate how much they’ll add to the above payment amounts.

Do you want a clearer picture of your buying power? Would you like to see what kind of homes you can get with your buying power? Please give us a call! 727-895-6200 

Sources: 1. National Association of REALTORS https://www.nar.realtor/topics/housing-affordability-index/methodology

  1. Moneyunder30.com https://www.moneyunder30.com/percentage-income-mortgage-payments
  2. Credit.com https://www.credit.com/loans/mortgage-questions/how-to-determine-your-monthly-housing-budget/
  3. National Association of REALTORS, 2016 Profile of Home Buyers and Sellers
  4. Iowa State University Extension, What is your house-buying power? https://store.extension.iastate.edu/product/pm1460-pdf
  5. HSH.com http://www.hsh.com/mopaytable-print.html

8 Holiday Scams to Watch Out For

Holiday Scams

The holidays are a happy time for celebrating with family, friends, and co-workers. Unfortunately, this time of year can also be turned sour by a wide variety of clever frauds, unauthorized debit and credit card transactions, and bogus person-to-person scams. By the end of 2015, individuals, retailers, charitable donors, and companies were victimized to the tune of $1.5 billion… and that number is expected to have gone up in 2016.

Just as you protect your home with an alarm system, you should set up defenses for your credit and identity. During the holiday season, fraudulent activity spikes, but here’s how to protect yourself from the eight most common scams.

Big Data Breeds Data Breaches

Big data during the holidays is great for marketers; it’s a bonanza of consumer information to use to lure shoppers to Black Friday deals and the like. However, while companies wrangle in the chaos of holiday orders, scammers search for weaknesses in a company’s cyber-security. According to a top executive at one of the leading credit bureaus, “Data breaches are inevitable and most consumers are vulnerable to identity theft… especially during the holidays.” In fact, 25% more consumers were affected by identity theft during the holidays in 2015 than in 2014!

The best way to reduce your risk of data breaches is use cash for all your purchases. According to a survey by TransUnion, however, only 20 percent of shoppers plan to pay with cash. If you’re part of the 80 percent using plastic, use a credit card instead of a debit card. You have more purchase protection using a credit card than a debit card if a data breach occurs or fraud happens.

Other protections from data breaches include:

  • Using a low-limit credit card for online purchases so you can detect fraudulent activity.
  • Utilizing services like PayPal to lower the risk of your card information being lost at the retailer.

Package Theft

E-commerce is great for holiday shoppers… but it’s also great for thieves. Last year, Insurancequotes reported that 23 million people had packages stolen at their front door!

To prevent this from happening to you, have your packages delivered to your office or delivered to a pick-up area such as a UPS store or Amazon Locker. You can also set up tracking notifications so that you know when to expect delivery.

And while you’re waiting for your packages, be on the lookout for this scam: a note on the front door saying you have a package waiting for pickup. The note asks for a call, often to a pricey number that leaves you on hold for a long period while they collect premium phone rates, or it leads to a person asking for details on your personal information to “verify your identity.” If the note isn’t from a shipper you recognize, or if the Googled number isn’t found, don’t get involved.

Online Shopping Scams

The big brother of package thievery is the online shopping scam. Phony online stores lure shoppers in through searches and online ads, enticing you with low-priced, high-quality items. These “bargains” cost you not only money, but also hours of time trying to fight the fraudulent transaction. To put salt in the wound, once these websites nab your personal information, they often also infect your computer with malware that compromises your login to your online bank.

To avoid the pitfalls of the fake online merchant, only purchase from retail names you know and trust. You could also Google the site and look for reviews. Yelp is a legitimate site for reviews as is the Better Business Bureau. Before you make a purchase online, double-check that “https” appears in the URL, which signifies that the site has passed stringent security compliance standards.

Poisonous Holiday E-Cards

E-cards are popular during the holidays because they’re a free, fun, and easy way to catch up with friends and family members. But beware because it’s just as easy for scammers to use fake e-cards to steal your personal information. A lot of fake e-cards you may get are from your hacked address book or the hacked address book of someone you know. At first glance, the card may look legitimate, but once you open it, you’ve been phished.

The only way to avoid this from happening is paying attention to detail. The number one tell of a fake E-card is any kind of misspelling. The URL will have a subtle misspelled word or your friend’s name is misspelled. Usually the misspelled word will contain a number: T1msmith@comcast.net for instance.

Fake Apps

ConsumerAffairs is reporting a huge spike in fake apps. Scammers are using fake retail and product apps found in Apple’s App Store to steal unsuspecting consumers’ financial information. Many of these thieves rip off company or brand logos to make the fake app look real. So before you get that convenient retail or product app, make sure it’s legit.

Just as with fake e-cards, fake apps will seem normal until you start looking at the details. Before you download that convenient retail or product app, make sure you check for the following:

  • A nonsensical description
  • No reviews
  • No history of previous versions

 

Gift Card Scammers

Scam artists skim or copy the codes on the back of gift cards before they’re bought. After the card has been activated, the scammers drain the card’s funds.

To prevent yourself from becoming a victim of compromised gift cards, buy gift cards displayed behind store counters, make sure preloaded cards are still loaded, and make sure the protective scratch-off strip is flawless.

Malicious Charities

During the holiday season we all feel an extra sense of giving. Grifters and thieves play on this sensibility by creating false charities and hitting you up on Twitter, Instagram, and in your e-mail inbox.

There are online resources to help you verify the legitimacy of charities. The website Charity Navigator is a non-profit organization that rates over 8,000 U.S-based charities operating throughout the world. Another way to get free reviews and evaluations on national charities is through the Better Business Bureau’s Wise Giving Alliance.

Corrupted Wi-Fi

You’ll probably hit the mall this holiday for some in-person price checking, and you’ll probably have your smartphone, laptop, and/or your iPad with you. Please be careful because skimmers and scammers love to manipulate Wi-Fi signals in places like malls and coffee shops to gather your financial information. These people create Wi-Fi signals that mimic the signal you use, then hack your info when you connect to it.

To protect yourself from Wi-Fi manipulators, just don’t make online purchases with your credit or debit card when you’re in a public space.

Who Should You Turn To?

If you catch the trouble soon enough, credit or identity fraud can be an inconvenience. If you don’t, however, one instance can have long-term impacts. If, for example, someone bought an appliance using your name while you were trying to refinance your mortgage, then you might not get approved for the loan!

If you’re curious to know if you’ve been affected, or if you know your credit is in disrepair and need help fixing it, please let us know so we can refer you to our recommended professionals.

Get Your Credit Score in Shape Before Buying a Home

Improve Your Credit Score

Get Your Credit Score in Shape Before Buying a Home

How strong is your credit? Cleaning up your credit is essential before you make any major financial moves. Having a bad score can hurt your chances of being able to open a credit card, apply for a loan, purchase a car, or rent an apartment.

It is especially important to have clean credit before you try to buy a home. With a less-than-great score, you may not get preapproved for a mortgage. If you can’t get a mortgage, you may only be able to buy a home if you can make an all-cash offer.

Or if you do get preapproval, you might get a higher mortgage rate, which can be a huge added expense. For example, if you have a 30-year fixed rate mortgage of $100,000 and you get a 3.92% interest rate, the total cost of your mortgage will be $170,213. However, if your interest rate is 5.92%, you’ll have to spend $213,990 for the same mortgage – that’s an extra $43,777 over the life of the loan! If you had secured the lower mortgage rate, you could use that additional money to fund a four-year college degree at a public university.

So now that you know how important it is to maintain a good credit score, how do you start cleaning up your credit? Here, we’ve collected our best tips for improving your score.

Talk to a loan professional

You can protect your score from more damage by getting a loan professional to check your credit score for you. A professional will be able to guide you to whether your score is in the ‘good’ range for home buying. Plus, every time that you request your own credit score, the credit companies record the inquiry, which can lower your score. Having a professional ask instead ensures that you only record one inquiry. Once you know your score, you can start taking action on cleaning up your credit.

Change your financial habits to boost your score

What if your score has been damaged by late payments or delinquent accounts? You can start repairing the damage quickly by taking charge of your debts. For example, your payment history makes up 35% of your score according to myFICO. If you begin to pay your bills in full before they are due, and make regular payments to owed debts, your score can improve within a few months.

Amounts owed are 30% of your FICO score. What matters in this instance is the percentage of credit that you’re currently using. For example, if you have a $5000 limit on one credit card, and you’re carrying a balance of $4500, that means 90% of your available credit is used up by that balance. You can improve your score by reducing that balance to free up some of your available credit.

Length of credit history counts for 15% of your FICO score. If you’re trying to reduce debt by eliminating your credit cards, shred the card but DO NOT close the account. Keep the old accounts open without using them to maintain your credit history and available credit.

Find and correct mistakes on your credit report

How common are credit report mistakes? Inaccuracies are rampant. In a 2012 study by the Federal Trade Commission, one in five people identified at least one error on their credit report. In their 2015 follow-up study, almost 70% thought that at least one piece of previously disputed information was still inaccurate.

Go through each section of your report systematically, and take notes about anything that needs to be corrected.

Your personal information

Start with the basics: often overlooked, one small incorrect personal detail like an incorrect address can accidently lower your score. So, before you look at any other part of your report, check all of these personal details:

  • Make sure your name, address, social security number and birthdate are current and correct.
  • Are your prior addresses correct? You’ll need to make sure that they’re right if you haven’t lived at your current address for very long.
  • Is your employment information up to date? Are the details of your past employers also right?
  • Is your marital status correct? Sometimes a former spouse will come up listed as your current spouse.

Your public records

This section will list things like lawsuits, tax liens, judgments, and bankruptcies. If you have any of these in your report, make sure that they are listed correctly and actually belong to you.

A bankruptcy filed by a spouse or ex-spouse should not be on your report if you didn’t file it. There shouldn’t be any lawsuits or judgments older than seven years, or that were entered after the statute of limitations, on your report. Are there tax liens that you paid off that are still listed as unpaid, or that are more than seven years old? Those all need to go.

Your credit accounts

This section will list any records about your commingled accounts, credit cards, loans, and debts. As you read through this section, make sure that any debts are actually yours.

For example, if you find an outstanding balance for which your spouse is solely responsible, that should be removed from your report. Any debts due to identity theft should also be resolved. If there are accounts that you closed on your report, make sure they’re labeled as ‘closed by consumer’ so that it doesn’t look like the bank closed them.

Your inquiries

Are there any unusual inquiries into your credit listed in this section? An example might be a credit inquiry when you went for a test drive or were comparison shopping at a car dealer. These need to be scrubbed off your report.

Report the dispute to the credit agency

If there are major mistakes, you can take your dispute to the credit agencies. While you could send a letter, it can be much faster to get the ball rolling on resolving a mistake by submitting your report through the credit agency’s website. Experian, Transunion and Equifax all have step-by-step forms to submit reports online.

If you have old information on your report that should have been purged from your records already, such as a debt that has already been paid off or information that is more than 7 years old, you may need to go directly to the lender to resolve the dispute.

Follow up

You must follow up to make sure that any mistakes are scrubbed from your reports. Keep notes about who you speak to and on which dates you contacted them. Check back with all of the credit reporting companies to make sure that your information has been updated. Since all three companies share data with each other, any mistakes should be corrected on all three reports.

If your disputes are still not corrected, you may have to also follow up with the institution that reported the incident in the first place, or a third-party collections agency that is handling it. Then check again with the credit reporting companies to see if your reports have been updated.

If you can keep on top of your credit reports on a regular basis, you won’t have to deal with the headaches of fixing reporting mistakes. You are entitled to a free annual credit report review to make sure all is well with your score. If you make your annual credit review part of your financial fitness routine, you’ll be able to better protect your buying power and potentially save thousands of dollars each year.

How to clean up your credit now

Does your credit score need a boost so you can buy a home? Please get in touch with us. We will be more than happy to connect you with the right lending professionals to help you get the guidance you need.