If your credit is not what it should be, and assuming you do have the ability and means to make the payments on a home loan, you should consider hiring a credit repair firm to help you clean up erroneous entries on your credit report. In fact, it’s important to repair your credit before applying for a home mortgage, because you credit score can significantly add to the cost of your loan.

The cost of your loan can go up in three ways:

• Points (the fee a mortgage broker takes from the loan proceeds)
• Interest rate (raising your payments and reducing the amount of loan you qualify for)
• PMI (private mortgage insurance may be required on loans for poor credit scores)

Let me explain.

A bad credit score adds points to your loan

The points you pay directly add cost to your loan. If you are paying two points on a $200,000 loan, you are having to pay an additional $4,000 for that loan. This may seem like the cost of doing business…no big deal, right? Don’t kid yourself. $4,000 is a lot of money.

But add that to the life of the loan, and we’re talking far more. That $4,000 piece of your loan carried for 30 years at an 8% interest rate balloons into a whopping $10,566. That’s a lot of dough. It’s worth it to do some credit repair.

A bad credit score raises your interest rate

Your credit score directly affects the cost of your loan when it comes to the interest rate as well. The difference between the interest rate for an individual with a good credit score and one with a poor credit score can be as much as 3% – in some cases, more. For a loan of $200,000, a 3% interest rate difference may add $437 to the monthly payment and $157,363 to the life of the loan. Dude, that’s another house in some markets. Do some credit repair first.

A bad credit score may force you to pay for private mortgage insurage (PMI)

You’ll take a big hit on your monthly payment if your bad credit score forces you to take out what’s called Private Mortgage Insurance. Not sure what that is? You’ll find out soon enough if you are in this situation, and it’s not pretty. It is essentially an insurance policy taken out by the lender and paid for by you insuring the lender against you defaulting on the loan. Believe me, you don’t want to have to pay PMI, because it will suck your bank account dry, often adding $100 to $200 per month to your payment. Ouch!

In conclusion, it’s best to invest in some above-board, ethical, legal credit repair before applying for the largest loan you’ll ever have, your home mortgage. This is the big league. Past mistakes will cost you dearly on your home loan in points, interest rates, and PMI. Do the wise thing and get your credit repaired before filling out that application.

• Perfect credit in 30 days!
• Get a new credit file!
• Get a loan without a credit check!

One of the most intriguing credit repair scams I ran across was not even pitched as credit repair. It was a loan that did not require the recipient to make any payments or have any credit history at all. Sound too good to be true? Generally, if something sounds that way, it is.

What is legal credit repair?

Legal credit repair consists of following the laws, rules, and regulation to a “t” to challenge any blemishes on your credit history. Consumer protection laws are in place to protect those with credit files at the three major credit reporting bureaus, TransUnion, Equifax, and Experian. Those laws force the credit reporting agencies to follow a specific process of researching challenged items within a fixed time period. If that research cannot be done within the alotted time period, the item must be removed from the credit report.

Stay tuned to learn more about how to repair your credit legally.