A bank rejected my mortgage application because of my bad credit score. How can I fix it?
I applied for a mortgage and was rejected because of my credit score. What can I do to fix it? How long do I have to wait to apply again?
The good news is there are several ways to begin repairing your credit—and to get a mortgage, you'll want to start working on that ASAP, our experts say.
First, try not to beat yourself up about it. About 1 in 11 Americans have credit card debt, according to Nerd Wallet, and plenty have debt from other sources, like student loans, car loans, and more.
Still, lenders rely heavily on a credit score to assess whether a client qualifies for a mortgage, and a score below 600 could mean getting rejected for a loan, or being approved for one with a high interest rate, writes The Street.
But if your score is low, you have options.
"When you are looking to fix your credit, the first step is to obtain a copy of your credit report," says Brittney Baldwin, vice president of National Cooperative Bank (a Brick sponsor). "Once you have reviewed your credit report, you will want to make sure there are no errors reported. If there are, you will immediately want to work to have these corrected."
If there are no mistakes, then you'll want to look closely at your report for what specifically is bringing down your score.
"Several things affect the credit score: How much debt you have on credit cards and charge cards," says Deanna Kory, a broker with Corcoran. "Ideally, for a higher score, you should have some you consistently make payments on, but the debt should not exceed 15-30 percent of your available credit on average."
Having no credit cards at all, in fact, can lower scores; ideally, a variety of line items—like credit cards, student loans, and car loans, for instance—that you pay regularly and on time will strengthen your score. Late payments bring your score down, as can paying off credit cards only partially so that the debt mounts over time.
If your score is low because you don't have enough lines of credit open, that's a quick fix: Get a couple credit cards, start using them, and pay off the balance on time.
"As for any sort of a major problem on the credit report, like a lien or bankruptcy, which stays on the report for seven years, you can get a letter of explanation if you need to get credit someplace, and that’s true for even late payments," Kory says.
If debt is the problem, opening new lines of credit is the last thing you want to do. Instead, make a plan for how you'll start paying them off.
"You will want to review your revolving credit utilization ratios and work to pay down some of your debts to get your ratios down. Also, try not to apply for new credit. Maintain older ones to show you have had those accounts for a longer period of time," Baldwin says. "Once you are comfortable with any corrections you have made, and you have paid down some accounts, contact your lender to see about applying again."
Keep in mind that this process could take several months. If you need help paying off your debts, you may want to enlist the help of a credit repair service—there are several that help buyers fix their credit to apply for mortgages.
Trouble at home? Get your NYC apartment-dweller questions answered by an expert. Send your questions to experts@brickunderground.com.
You Might Also Like
