Credit is a necessary evil of life. You can have too much of it because you'll end up in debt forever or ruining your credit reputation, but you can't have too little because then no one will loan you money when you need it. Managing your credit might be difficult, but it's necessary if you ever want to qualify for a fixed rate mortgage or you simply want to renegotiate your mortgage for a better rate.
Step 1
Research fixed mortgage rates and come to understand them. You need to comprehend fixed mortgage rates specifically. A fixed mortgage rate is a loan that already has the interest that will accrue over a specific number of years figured out. The interest is "fixed" and can't change. This is helpful when trying to make a monthly budget and setting long-term financial goals for yourself.
Step 2
Go to AnnualCreditReport.com and claim your free copy of your credit report. You are legally entitled to one a year. Review the information contained within the report and call the applicable reporting agency if you find an error. If your credit is poor, you likely won't qualify for a mortgage, especially a fixed rate mortgage.
Step 3
Pay off your debts, including loans and credit cards, starting with the debt that has the highest interest rate. You don't necessarily have to pay off all of your debt, but getting the amount you owe significantly lower than your credit limit is a good first step toward showing financial responsibility. If you need help coming up with a plan for paying back your debts, consult a debt counselor, who should help you create a budget and seek a settlement plan, if necessary.
Step 4
Declare bankruptcy if your credit is unmanageable and there is no other option to pay back your debts. Doing this will fix your immediate financial issues but will leave a bad mark on your credit report for seven years, making it difficult to obtain new credit or a mortgage. Make sure bankruptcy is the appropriate (and only) step before doing it.
Step 5
Apply for a fixed-rate mortgage. Once your credit is restored and you are certain you have a solid financial standing, you can apply for a fixed-rate mortgage. This will make it easier for you pay off your mortgage once you receive it and will allow you to budget your financial life more exactly. A variable rate on your mortgage could lead to skyrocketing interest rates and a ruined credit rating, so preparing your credit in advance to qualify for the fixed-rate mortgage can save you a lot of trouble in the future.
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