Tips For Cleaning Up Credit Before Buying

It might be a buyers’ market, but that doesn’t mean banks are falling all over themselves to write loans. Getting a home financed isn’t impossible in Toronto today, but it will take cleaner credit and a larger down payment than buyers enjoyed in the not too distant past.

If you’re in the market to buy and you want to make sure a loan goes through, there are things you can do to make yourself look more attractive to lenders. Depending on what shape your credit happens to be in, there are quick fixes and some that might take a little longer.

To improve your credit standing and help bolster your image in the eyes of lenders, make sure to:

• Pull your credit reports – Contact credit reporting agencies like Equifax and TransUnion to see where you really stand. Having credit history reports in your hands can help you discover both major and minor knocks that look bad on your record. They can also help you create a game plan for cleaning up your record.
• Target bills that must be paid off – Old, outstanding debts even if they are small in amount can hurt you in the long run. With your credit reports in hand, target old debts you may have forgotten about and get them cleared up.
• Reduce debt to income ratio – Your credit reports will come in handy here, too. Take a look at who you owe and how much is owed. To reduce your overall debt to income ratio as quickly as possible, zero in on the small accounts first and get them paid off. Then move on to bigger ones. Ideally, you’ll want your outgoing monthly debts to be a small fraction of your total take home pay. Paying down debt can take a little time, but it can make a big difference in getting financing. Lenders, especially gun shy ones, are more likely to write loans for people who have plenty of income to cover the debt.
• Get errors fixed – Creditors are human, too. This means they can make reporting mistakes. If you see any errors on your credit reports, make sure to take measures to remedy them. The credit reporting agencies can walk you through the steps for seeking redress.

It can take a little time to clean up credit if major issues are present. Minor blemishes, however, can generally be tackled with little effort at all. The cleaner credit happens to be, the lower debt to income ratio and the higher the down payment involved, the more likely it is a loan will go through – even in this economy!

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