Looking To Improve Your Credit To Buy A Home? Myths That May Actually Hurt Your Score
If your credit score is not the greatest, it is strongly advised that you repair your credit before you look to buy a home. Having a higher credit score increases the chances that you will be approved for a loan, while also helping you to get a better interest rate. This can help you save thousands of dollars over the course of your loan. Unfortunately though, there are many myths out there about credit score repair and some of these myths may actually harm your score, rather than help it. Here are three myths you need to know about if you are doing credit repair for a new home and the truth surrounding these myths.
Myth 1: Close Unused Credit Cards
One of the myths out there related to credit repair is that you should close credit cards that are not being used, or close credit cards as soon as they are paid off to keep yourself from charging them up again. However, when you close credit cards, you may actually do more harm than good. You can lower your available credit, which can affect your debt to available credit ratio. And if you close one of your older credit cards, you reduce the length of your credit history. Always carefully consider how closing a particular credit card will affect your credit score before you close it.
Myth 2: Move Debt From One Source to Another
Another myth related to credit repair is that you should move credit card debt from one source to another to lower how much debt you have on particular credit cards. For example, if you have $5,000 charged on one card and nothing charged on four other cards, many people think that moving money so that each card has $1,000 on it looks better. Ultimately, your credit utilization rate is the same whether the debt is on one card or five cards. Transfer the balance to your lowest interest credit card and work hard to pay the balance off as soon as possible.
Myth 3: Settle Debt to Get It Off Your Credit Report
The last myth related to credit repair is that you can settle debt to get it off of your credit report. Settling debt will not get it removed from your credit report unless you specifically settle with the creditor to remove it from your report. If this is not a clause in the settlement agreement, the settled debt will appear on your report for seven years. And unfortunately, settled debt hits your credit negatively, as the debt was not paid in full.
Increasing your credit score can be tricky. You need to find just the right ratio of available credit compared to your income and debt ratio. If you are looking to increase your credit to make a large purchase, such as a house, consider working with a credit repair expert. They can help you find the perfect balance to help your score improve. If you are interested in Credit Repair for New Home, talk with a mortgage broker in your area.