Credit Repair 101: Tips for Homebuyers

If you don’t have perfect credit, you are certainly not alone. Research shows that Americans have racked up too much debt, and that this is a part of the economic problems that we face currently. On the other hand, the world that we live in revolves around access to credit, for businesses and individuals, and maintaining access to credit is essential for most of us.

There is lots of information out there about credit repair. The bottom line is that individuals with bad credit must get their spending under control, address late payments and other issues, and be consistent about paying their bills over time.

Now more than ever, having good credit is essential for buying a home, due to the increased restrictions that many lending institutions have placed on home loans. In many cases, homebuyers with less than perfect credit may find themselves unable to obtain the most attractive financing terms – or to obtain financing at all.

What you may not know is that most credit reports contain inaccurate information. A June 2004 study by the U.S. Public Interest Research Group, a consumer advocacy group, showed that 23 percent of consumers had mistakes on their credit reports serious enough to result in the denial of credit.

Consumers’ rights are protected under the Fair Credit Reporting Act. Here’s what you can do:

• Find out what’s in your file. Every U.S. consumer is now entitled to one free credit report annually from each of the three credit bureaus, Experian, Equifax and TransUnion. Visit www.annualcreditreport.com for more info.
• Dispute inaccurate information. You can dispute errors online at the website listed above, or write a letter to all three credit bureaus detailing the dispute. Banks typically use the middle of all three credit scores when assessing a loan application, so this is important.
• Dispute inaccurate information at the source. Contact your credit card company, etc. if they have provided the wrong information.
• Get rid of outdated information. By law, if information such as a late payment is more than seven years old, it is supposed to be removed.
• Protect your credit identity. It is a federal crime to knowingly and willfully obtain a person’s credit report without consent or under false pretenses.

If you are seeking to purchase a home, refinance a home, or obtain additional credit in 2009, make sure that you stay on top of your credit, so that you can obtain the most favorable terms for your loan.