It’s a simple fact of life: if you want to own a home and don’t have the cash to buy it outright, you need a mortgage. Here’s another fact of life: to be approved for a home loan, your credit score must be at or above your lender’s minimum level.
Fortunately, yet another fact of life is that most things are possible with a little help and effort. Just ask Keila S.!
Keila joined the CredEvolv platform with a 532 credit score. Her goal was to reach the minimum score of 620 required to qualify for a mortgage. The nonprofit credit counselor we connected her with had three collections accounts deleted from her report. Meanwhile, Keila paid down her credit cards and established new tradelines.
In five months, her score rose to 627, enough to make a home loan possible!
Why are high credit card balances so bad?
Having a high utilization ratio can hurt your credit scores – even when you make the minimum required payments on time every month. It also makes it increasingly difficult to qualify for more credit. In addition to the impact on your credit score, high credit card balances can increase your debt-to-income ratio (DTI).
Lenders look at your DTI ratio to gauge how much of your income is already tied up in debt payments. A lower DTI signals to lenders that you have room in your budget to take on more debt without overextending yourself. On the other hand, a higher DTI might raise red flags, suggesting you could struggle to manage additional monthly payments.
In general:
- A DTI below 36% is considered good and indicates you have a manageable level of debt.
- A DTI between 36-49% is acceptable but may make it harder to qualify for some loans or the best interest rates.
- A DTI above 50% could limit your borrowing options and indicate that you’re at risk of becoming overwhelmed by debt.
What can and can’t be removed from my credit report?
As we discussed in one of our Credit Education blogs, it’s important to know what can legally come off your credit report and what must remain. Here’s the truth: Better credit is not about erasing your financial past. It’s about correcting inaccuracies and improving your credit going forward.
There’s a lot of misinformation out there. Some so-called credit repair companies claim they can remove all derogatory information from your credit report. But this simply isn’t true. In fact, it’s illegal to remove accurate information, even if it’s negative.
Under the Fair Credit Reporting Act (FCRA), credit reporting agencies are required to report accurate, verifiable information. If you missed a payment or defaulted on a loan, for instance, that information can legally stay on your report for up to seven years. Bankruptcies can remain for up to 10 years.
At CredEvolv, we want to set the record straight: no one can legally remove accurate, negative information from your credit report. What the certified, nonprofit counselors on our platform can do, however, is help you dispute any inaccuracies or outdated information that may be hurting your score unfairly. They are trained to spot errors and unfair practices on your report. This gives you the best chance of improving your credit by removing anything that doesn’t belong.
What is a tradeline on a credit report?
A tradeline is an industry term for a credit account that a lender reports to a credit bureau. Each credit account has its own tradeline, which includes information about the account, the creditor, and the type of credit, such as the account balance, payment history, and account status.
A person can have multiple tradelines on their credit report, one for each credit account in their name. Credit bureaus use tradelines to calculate a borrower’s credit score and assess their creditworthiness.
As Keila’s story shows, good credit begins with having credit. Partnering with a reputable credit counselor on the CredEvolv platform – someone who can counsel you about opening tradelines that benefit you – is how you can surpass your own credit score goals.
Read more credit success stories here!