Purchasing a home is an exciting yet busy time. Between house hunting and signing paperwork, there is much involved in the process. Even in the lead-up to buying a home, you’ll find that there is much to be done. One of the most important items to consider is debt management. If you have credit cards, loans, or any other kind of debt, it is crucial to do what you can to pay as much off as you can. This will ensure that you lock in the best interest rate and the maximum loan amount that you can get. For those looking to purchase a home in the next 6–12 months, follow these essential debt management tips from the experts at ProMediate.
Review the accuracy of your credit report.
In the UK, an estimated 1 in 5 people have errors on their credit report. Before applying for a mortgage, be sure to carefully review your credit report. Companies routinely make errors when it comes to late payments, account closures, and balances owed. Removing even one error can raise your credit score significantly. If you find an error on your credit report, you can file a dispute with credit reporting agencies. You can also attempt to reach out to the company reporting the inaccuracy to try and resolve the issue. If you are unable to resolve an issue with a specific company, mediation may be appropriate.
Do not take on additional debt.
Whatever you do, do not incur additional debt prior to applying for a mortgage. This can not only lower your credit score, but it can affect your chances of being approved for a mortgage at all (depending on the type and amount of the debt). Take proactive measures to ensure that you have enough saved for emergency expenses so that you do not have to apply for another credit card or loan. If you do not yet have dedicated emergency savings, start one right away. Putting away just £500 to £1,000 can eliminate your risk of having to rack up additional debt.
Pay down credit cards with a high debt-to-credit ratio.
Since purchasing a home is imminent, you don’t have much time to pay off a significant amount of debt. If it isn’t feasible to pay off all of your debt, get strategic with where your money goes. Make it a priority to pay down all high debt-to-credit ratio credit cards. If you are using 30 percent or more of your credit limit on a single card, you technically have a high debt-to-credit ratio. Reducing this percentage as much as you can (on as many cards as you can) will increase your score quite rapidly.
Seek the help of a freelance financial consultant.
Finally, if you are looking to be as strategic as possible with managing your debt, consider working with a freelance financial consultant to ensure that you get your finances under control. An experienced freelance financial consultant can help you create a budget, pay off debts, and save. Searching some of today’s leading freelance platforms can help you find financial consulting services, weigh reviews, availability, and service costs.
Try to negotiate
Rather than hiding from the problem, get a grip on it and suggest mediation as a way of resolving debt problems and potentially reducing your debts. Try to agree a repayment plan. Never defend a hopeless case in Court as you will probably be landed with increased costs. A legal registered judgment can badly affect your credit rating.
When working to manage your debt prior to buying a home, the best approach is to tackle everything head-on. Although taking an honest look at your debt can be anxiety-provoking, having full awareness of your situation is one of the biggest pieces of the battle. When you know what you need to do, you are empowered to make the best possible financial decisions.
ProMediate provides mediation services for individuals, families, and businesses throughout the UK. Learn more about ProMediate’s expert services, fees, and more today.