Most people who plan to buy a house have a mortgage.
Mortgage loans are usually very large, with homeowners borrowing hundreds of thousands of dollars. And most mortgages are paid off over 15 years, 20 years or 30 years. That means borrowers pay interest on their large loans for a very long time.
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For all these reasons, it is important to get the highest possible creditworthiness before applying for a home loan. That’s because your credit can affect the interest you’re charged. And even a small difference in the rate you pay can cost you tens of thousands of dollars in additional interest.
Most steps you take to improve your creditworthiness can take some time. This can be a problem if you are trying to buy a house now.
Fortunately, there are ways to build credit quickly. In fact, here are two that you may not have heard of. While they don’t work for everyone, they may be worth a try. Keep reading to learn more about writing goodwill letters and becoming an authorized user.
1. Write a goodwill letter to remove negative information
Even a single late payment on your credit can cause a dramatic drop in your credit score. And if you have multiple payment arrears, this may be enough to disqualify you from the most favorable one mortgage rates.
If you find yourself looking at one or two late payments from different creditors in your credit history, you may have an option to remove it from your record and quickly retrieve your score. You can just write a write goodwill letter and request that the creditors remove the black marks from your file.
This will not work in all cases, as many creditors will not do this if you were legitimately late. However, if you are still a customer and have paid on time in most situations, but have only had one or two issues, your creditor may be more than willing to work with you.
Or if you still have an outstanding balance, the creditor may agree to remove the record of late payment if you make a deal to pay your balance in full in return.
Clearing arrears from your record could be the fastest and best way to improve your credit if you are able to get it done
2. Ask a loved one with good credit to make you an authorized user
If you have a family member or friend with a solid credit history, they may be able to help you improve your score. Ask if they would consider adding you as a authorized user on one of their accounts that is in good standing.
That would mean the account shows up on your own credit report. You would benefit from their timely payment details, and their older accounts would help your average account history age, as a longer credit statement is better than a shorter one. And they don’t even have to give you access to the credit card for that.
This won’t help as much if you have a lot of negative information about your credit, but it can still make a difference. And it can certainly help you quickly build a credit profile that will impress mortgage lenders if you do not have a long credit history yourself.
Both steps can make a big difference in your credit score. Give them a try if you want to get a mortgage ASAP and just need a little extra help earning a good rate.
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