• Minneapolis, MN: Unfortunately, life sometimes throws us curve balls. Bad credit is something that can happen to anyone. So credit repair is something a lot of us have to think about after we get back on our feet. Good credit is key to buying a home, especially for first time home buyers.

    Unfortunately, for most people, bad credit and first time home buyer programs, and especially down payment assistance programs DO NOT go hand in hand.

    There are too many programs to paint a broad picture, but here are some pretty standard mortgage loan and credit score guidelines:

    • 640 or higher score required for down payment assistance
    • As score drop below 640, many first time home buyer programs go away
    • FHA allows for as little as 3.50% down with scores as low as 580 (but it’s hard to get approved)
    • Below 580 may be available in the sub-prime market, but you’ll need no less than 10% down, and maybe more

    Recent bankruptcies and foreclosures can also mean an automatic denial until you’ve met some minimum waiting periods.

    Credit Repair Tips

    Basic credit repair is pretty straight-forward. I’m not a fan of paying credit repair companies, because most people can do their own credit repair. Look at the graphic to get an idea of how each category determines your credit score.

    Credit score tips

    Here are a few tips on how to do credit repair yourself.

    First, no more negative information. Get current on everything. For many people, it’s just bad habits. Put all your bills on automatic payments if you have the money, but just can’t seem to remember to pay on time.

    Next, pay down credit cards to as close to a zero as possible, and keep the balances low or zero. You DO NOT need to charge up and pay down to build credit. This is a myth, and more often then not, will actually hurt credit scores.

    Dispute items that a really not correct. Minor things like a slightly wrong address history should be corrected too, although they have nothing to do with score. Disputing small old collection items many times does work in having them magically disappear, but disputing things that ARE correct, and especially larger dollar amount accounts is usually just a waste of time, and bad advice. I recently saw a client try to dispute his bankruptcy.

    Pay off collections. Many find it easier to start with small balance ones, and work up to large balance ones. Another big tip is to pay the most recent ones first. Some of the really old ones can be just left alone in many cases. Square up on any judgments.

    Bankruptcies and foreclosures hurt a lot. There really isn’t anything magical you can do about these, except show good habits going forward.

    Finally, establish new credit if you don’t have any current credit. This is especially important as the credit reports see’s your old negative stuff, but want to really know how you handle things today. If you have no active current credit, your score will never go up.

    For most people, credit didn’t get wrecked overnight, and repairs may take awhile. A good benchmark for most people is everything being cleaned up and current on your accounts for at least one year, but many people can jump their score up fairly quickly. It just all depends on where you were to start with.

    The biggest credit repair tip I can give is this: If you do nothing, nothing will change. If you do something, something will change, and usually for the better. So get working on your credit repair, and you’ll be back in the good graces soon.

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