Improving your credit before applying for the HUD Section 184 Loans

If you are planning to apply for HUD 184 loans, you need to check your credit rating beforehand. The last thing you want to have all your plans in order only to be told that the ratings on your credit won’t allow granting of your loan. You probably understand that your credit rating has a direct effect on your financial health in not only getting you the best interest rates on your credit cards and car financing but also when applying for a home loan.

What affects your credit rating?

This makes it necessary that you ensure you have sorted all issues affecting your rating to stand a chance of benefiting from the Section 184 loans. Bear in mind that it is not the amount of money you make that affects your credit rating, but rather the quality and length of your credit history. In simpler terms, how much have you borrowed, how consistent have you been in paying back, and what is the outstanding debt you currently have.

These are the actors that any lender would want to check before giving you any loan including the HID 184 loan. So you need to make sure that you don’t borrow too much, you avoid falling back on repayments and that you have done enough to see to it that your outstanding debt is reducing every time.

Credit requirements for the Section 184 loans program

Unlike what you will see for many home loan programs, the HUD 184 one does not have a specified threshold credit score requirement for qualification. That is not to mean that it gives a blind eye to your credit rating; the program has requirements concerning factors that directly influence your credit score. They are that you should have zero:

  • Outstanding charge-off balances
  • Outstanding tax liens or judgments
  • Foreclosures or bankruptcies in the past three years
  • Outstanding collection items
  • 30-day delinquency ratings in the past year

You want to make sure that you iron out the mentioned issues least they adversely affect your application for the HUD Section 184 loans. It is worth noting that the most common credit issue is the delayed repayments (delinquencies) of outstanding loans which after time are turned to the collecting agencies. The strict credit compliance of this loan program for your home ownership or renovation needs leaves no room for even as little as $10 on any outstanding account.

What can you do to improve your credit rating?

The first thing to do is to get your credit reports from the top three credit bureau agencies which are TransUnion, Equifax, and Experian. Getting all three is essential since they may contain different information. The next thing would be to identify the areas in the reports that require your attention and correction. Such issues include collection items that appear yet you already paid them off, collection accounts yet to be paid, and incorrect delinquency schedules reflecting balances although you may have settled everything.

The mistake that many people make is to think that after paying their balances the records are immediately synced. You may have to follow up with your agencies to make that happen.