Credit will affect your ability to get a construction loan. For the credit-challenged, this means working hard to clear up bad debt. There are steps to increase your credit score.
Begin with your credit report. It is a good idea to check your credit report every three months. If you cannot afford it, then go to an annual free credit report site and sign up. You can check all three major credit-reporting agencies at the same time. Experian, Equifax, and TransUnion all provide a free yearly report.
Keep in mind that not all three agencies will have the same information. One or two may be outdated, have the wrong personal information, missing creditors, etc. With that being said, know what is on your report and make sure it is corrected.
After doing a bit of housecleaning on your reports, look at your accounts. If something is over two years old, leave it alone unless the creditor is updating it on your credit report. If it is 7-10 years old, leave it alone. Most bad debt has a shelf-life, but some older debts can be sold to collection agencies before they are to come off your credit report. They specialize in buying old debt and recycling them. If the debt is sold to a collection agency, try to deal with the original debtor. Collection agencies tack on heavy fees that they will charge you.
Another thing to check for is revolving accounts. Do not pay off a revolving account and close it. This can be very bad for your credit score. Pay down the balances instead.
Stop buying things, such as a car, that will decrease your credit score. New cars with a fixed term loan will demolish your credit for six months. It is only after that time that your credit score starts going up.
Getting your credit to soar upwards can be a challenge. The best ways to do that is to watch how you use your credit cards. High interest can hurt if you cannot keep up with monthly payments. Making even one late payment can have adverse affects on your credit score.
If you must use a credit card, then watch your spending habits. Use it for emergencies and necessities only. Be aware of credit card companies who penalize consumers for not using their credit cards. As absurd as it may seem, it can happen. Choose a credit card company with a low interest rate and no penalties. Also, watch how many credit cards you get. One or two good credit cards are all you need. It is easier to make monthly payments when you do not have to juggle payments each month.
Build you credit and credit score by paying important bills on time. Everyone from landlords to utility companies check your credit. If you have a history of paying rent or an electric bill late, it will reflect in the loan company’s decision to lend you the money you need. Questions will arise on whether or not you are able to make your payments on time.
One thing that most of us never consider is employees who do credit checks. Banks and any company who deals with customer personal information will do a credit as a part of your application. It may seem bad, but it is to protect the customers.
Getting the construction loan you need will not take long if you work hard at keeping your credit in check. Take time to prioritize your monthly expenses. Get rid of things you do not need and pay on time the things you do.
Set a goal for each thing you need to work on. It could be a high credit card balance or a high interest car loan. Figure out what you can and should pay on your credit report. Clean it up and keep it clean. Only buy what you need and splurge once in awhile.
The biggest payoff will be that brand new home you designed and built.
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