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Credit repair is often a confusing term. The word repair throws a lot of people off of the actual meaning. This could mean either correcting the mistakes already present in your credit report or improving your credit score by inculcating better financial habits.

This entire exercise of repairing your credit assumes significance as you prepare to buy a house, as all mortgage related approvals depend on your credit report or score. The loan could be rejected because of either bad reports or a low score.

First way of repairing your credit, which involves correcting mistakes already available on your credit report is often a daunting task when compared to the second option. You need to get your reports from the credit reporting companies. As you scan through these reports, note down the points that need rectification. Send an error report to the companies and ask for rectification of the same before these are re-submitted to the banks who are willing to give you mortgage loans. This is more often an administrative exercise and needs constant follow-up with the companies concerned.

The second option which involves inculcating better financial habits to improve your credit score is a long term strategy and is aimed at improving your financial status on the whole. The reports might be accurate but scores low. This could be due to some incidents of the past, which are affecting your credit score. The past incidents could be default of loan payments, application for bankruptcy in the past or any such financial setback experienced. You can improve your scores by being more financially responsible. Steps like ensuring on time bill payments, credit card payments, loan payments, are a few steps that can improve your score and help in getting the mortgage for your house, without any hassles. The only hitch in this case is that you need to start the entire process of repairing your credit score much in advance as short term steps shall not help in improving your score and you need to prove that you can sustain the good habits for a long duration.

Bad credit reports or credit score scan still get you a mortgage loan, but on high non-prime interest rates, some thing like the sub prime cases that have spelled doom for the real estate markets in recent past. Hence, this form of credit is mostly rejected by banks nowadays fearing defaults and related problems. In fact poor credit results in interest rates that are almost two times the normal interest rates.

Simple steps on repairing your old bad credit and building a new credit takes some time, but is worth the pain and effort, as all matters related to financial transactions are connected with your credit reports and hence have a big impact on your daily life and major purchases, like your dream home.

By: Ravisankar Poduval

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