Step One
Using your computer, go to the Internet and apply online to receive your free credit report. Recent federal regulations require that the agencies provide this for you at least once a year. Visit a website such as FreeCreditReport or others and they will walk you through the process.
Step Two
Using your computer, go to the Lexington Law website and subscribe for their credit cleaning service. This should be done at least six months before the expected need to apply for a mortgage. Lexington Law is a fantastic service that you only need to keep until you get your mortgage funded. The $30 or so a month that the service costs can mean the difference between getting a mortgage and not getting a mortgage. They will request that you send them the credit report that you received from Step 1 above. Follow their instructions closely!
Step Three
Bank Statements: These are a MUST have. You must find all your bank statements for the last three years. If you don’t have them, ask the bank. Most all banks now provide this information online. Your bank will always provide copies going back three years. If you use bill pay services, print out the details page of EVERY online payment you made–just showing line item with a payment is not enough. You must have the details.
Step Four
Make two lists. The first list is all the utilities that you have used over the last three years. The second list is everyone that appears on your credit report such as credit cards, store accounts, cell phone companies and so on. For EVERY company listed, begin the process of collecting the original or copy of each month’s bill and a copy of the check or other payment method used to pay the bill. Yes, this is time consuming but critical. Even through your landlord does not send you a bill, you do need to have copies of all the checks or money orders that you used to pay the rent or mortgage. Go to the landlord and ask for a copy of your account ledger or ask them to prepare some letter stating that you paid your rent on time. But canceled checks are always the best proof.
Step Five
Organize the “bad” debts, or bills that you have not paid or are in a late status, by amounts due. Those that are $100 or less, pay them immediately. If you can’t do that, you can’t afford a house. Then work on those that are $250 or less. Than $500 or less. Any that are over $500, ensure that you have contacted them and are on a payment schedule. They payments need not be more than $25 a month, but a steady payment of a bad debit is essential to show responsibility and desire to meet commitments.
Step Six
Using the 3 ring binder, tape, and hole punch, begin to organize all the paperwork. It should read like a book with separate sections for Bank Statements, Utilities, Rent and Mortgages, and Creditors. Tape canceled checks and other receipts to the bills or tape on a separate page. If you are good with the computer, you can scan all the information into the computer and then print out copies as you need them.
Step Seven
When its time to apply for a mortgage, take the binder to the mortgage agent. They will be impressed and very happy.
