A rent-to-own home is actually one of the best alternatives to owning a home
if your credit rating is suffering. Before you actually buy the home you'll get
to move in and pay rent for a lease period. During the lease period you are
afforded the time you need to build up your credit score. There are several
steps to take to increase your credit rating, which we'll discuss in this
article. Really, there's no downside to improving your credit. Not only does a
better credit rating qualify you for lower interest rates it can mean you have
more leeway when negotiating deals with lenders.
To start, you should check with each of the three major credit reporting
agencies and go over your credit reports. Those agencies are Experian, Equifax,
and Trans Union and all of them offer you a free credit report once per year.
Examine the reports for anything that doesn't look correct. Once you've identified
any discrepancies on the reports you should report those discrepancies to the
corresponding credit reporting agency and ask them to remove the item from the
report. If the item is removed, it can give your credit a significant boost.
The next step you will want to take is to setup a budget. A significant
portion of people with poor credit are in that situation because of poor
budgeting. Take some time to sit down and go over your income vs your expenses.
When you apply for a loan later on to purchase the home you are renting, the
lender will want to look at your debt to income ratio, otherwise known as a
DTI. This is the portion of your income that goes to recurring debts. Ideally
your DTI should not exceed 30%.
Keep in mind that a lot of your regular expenses are not counted as debts.
For instance, your groceries and your gasoline are things you purchase on a
regular basis but they aren't considered debts and as such do not count towards
your DTI. Things that do count as debts include; utility bills, rent, car
payments, college loans, etc.. Be sure cancel or downgrade services that you
don't really need or often enough to justify the expense.
No comments:
Post a Comment