#5 Close out old accounts

In some cases if you have TOO MUCH available credit on your credit report it can hurt your score and reduce the amount lenders are willing to loan you.  This can happen to people who have long credit histories.  Old, unused accounts are never closed but they do count as available credit nonetheless.

If your credit score is suffering from too much available credit it may be to your advantage to close out a few of those old accounts.  However, if you do this you need to close these accounts early, well before you apply for a mortgage.  Closing them too close to the time when you apply for a mortgage won’t help your credit score at all.

# 4 Don’t take on new debt

Boy, I can’t emphasize this one enough.  When you move into a new house how tempting is it to go out and buy new furniture or new appliances?  It’s a new house right?  You want new things to go into it.

This is like suicide for rent-to-owns.  You are supposed to be improving your credit and not taking on new debts is critical!  Not only that, but the payments on those new debts will also reduce the amount of mortgage you can qualify for.  Even a monthly payment as little as $25 can reduce the amount of a mortgage you can qualify for by $4,000.  Is that new couch really worth it if you can’t buy the house at the end of the option period?

That being said there is one case in which taking on new debt can help you - if you don’t have enough established credit to qualify for a mortgage.  This only applies to people who are very new to building their credit.  It is not intended for people who are trying to RE-BUILD their credit.  Additionally the only way it helps is if that debt is PAID OFF at least 3 months before you apply for a mortgage.  If it isn’t paid off long enough before you apply for a mortgage it won’t register on your credit report as paid off yet.  These things can be slow to update so you need to give yourself plenty of time.

# 3 Stop using your credit cards

Even if you weren’t trying to improve your credit I would suggest this one.  Credit cards are just sickeningly easy to get in trouble with.  I don’t know many people that have credit cards that haven’t gotten into trouble using them at some point in their life.  Just keep this in mind – the more credit card debt you have the lower your credit score.

Just stop using the darned things.  Not only do they lower your credit score when you have higher debt, but remember that when the monthly payment on your credit cards goes up the amount of mortgage you can qualify for goes down – by thousands of dollars!

# 2 Pay everything on time

This is the second-most important thing you can do when it comes to improving your credit score.  If you want to qualify for a mortgage you absolutely MUST make all of your monthly payments on time!  NO late payments.  NO bounced checks.  NO excuses!

Consistent, on time payments will really help your credit score.  Not only that, but if you make even one late payment during your rental period you may not be able to qualify for a mortgage at the end.  Lenders HATE to see late payments on your credit, so once you start an option period make sure that you make those payments on time.  Remember if you can’t qualify for a mortgage your option fee is non-refundable.  You don’t want to lose that money or the house.

# 1 Sign up for a credit repair service

When our credit reports have damaging items on them, sometimes the only way to get your credit score high enough to qualify for a mortgage is to get those damaging items off.  This is where credit repair comes in.  A REPUTABLE credit repair company can help you repair your credit and help you remove damaging items from your credit report.  In fact, in cases where a buyer cannot qualify for a mortgage and wants to do rent-to-own, I almost always recommend they sign up with a credit repair company.

If you are serious about doing rent-to-own, working with a credit repair company is a must.  I recommend www.renttoowncreditrepair.com.  They are a reputable company that can often achieve impressive results at rebuilding your credit.

Credit Repair for Yourself

Previously, I spoke about a few tips from my book Rent-to-Buy that will help you once you have been approved by the seller.  I want to take it a step further and talk about the most important step you should take.  If your credit needs improvement before you can qualify for a mortgage, you absolutely want to jump right on this. You should sign up for this as soon as you are approved by the seller and have scheduled your move in date. Credit repair is absolutely critical. Unless you already have excellent credit, this is something you definitely need to focus on. You won’t be able to get a mortgage if you don’t improve your credit. If you are working with a seller who has read my book ‘Rent-to-Sell’, they will almost certainly require you to take this step.

Without this, you may not be able to qualify for a mortgage when it comes time to buy. A credit repair company will help you get your credit in shape so that you can qualify for a mortgage. If you are looking for a quality credit repair company, go to: http://www.wendypatton.com/credit-repair. Don’t put your option fee at risk and don’t waste all of those months of rental payments with nothing to show for it. Chapter 17 of my Rent-to-Buy book goes into details about credit repair.

Also, join me on Thursday, March 11, 2010at 8 PM EST so that I can introduce you to my credit repair specialist.  His ability to repair credit issues and get my Lease Option buyers to the closing table is incredible.

CLICK HERE to reserve your spot.

In addition to helping your tenant buyers, you may also want to consider credit repair for yourself.

Even if you currently have good credit, I will show you an example where an increase of just 22 points (from 679 to 701) saved an investor over $100,000 in interest on just one investment property.