Today’s credit tip will focus on the largest mistakes people make when trying to get their credit ready for buying a home.
Paying off/settling collections – This is generally a bad idea, as it will cause your score to drop as your activity date gets renewed.
Closing down revolving accounts – You need at least one revolving account to meet the minimum criteria of the scoring algorithms used by all three credit bureaus.
Paying off your auto and student loans – Not a good plan. When you pay your installment accounts they close naturally, and then you lose your length of credit history. A better approach is to simply pay the minimum amount for as long as possible.
Acquiring positive credit – Okay, so your credit report looks kind of blank! Don’t go nuts and apply for too much. That won’t help and you will receive too many inquiries. Less is more. Apply for one secured credit card and use it sparingly each month. You generally will need three open credit lines. Next, try inheriting a couple of positive credit accounts from a close relative. Regardless, get your own as well; you’ll be grateful in the end.
Disputes – This is a standalone credit tip all by itself. You can – and should – dispute anything on your credit report that is inaccurate.
Student loan collections – Unfortunately, most student loans are government backed so they don’t just disappear after a certain time. And no one hands out mortgage loans with student loans collections running rampant. Therefore, get on a new payment plan and make sure that part of the payment plan is a requirement that the loans will be put back into good standing after a few months of regular payments.
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