Posted by: islamicfinancingnews | May 19, 2013

Islamic mortgages and repairing your credit

islam21 One of the prerequisites to obtaining proper Islamic mortgages to buy a home includes having reasonable credit. Some potential borrowers who have never borrowed money have no credit history whatsoever, while others may have a history of poor credit. For example, missing utility payments and having the power turned off, making late or even partial payments on credit cards, or defaulting on loan payments altogether can create negative activity on your credit report.

While building up credit for those without a credit history seems fairly straightforward, bad credit can be repaired and restored over time. Financial experts suggest the first priority is bringing delinquent payments up to date. Next, reducing the amounts owing on these payments will help to lower your debt to credit ratio. Finally, paying off any debts that have been turned over to a debt collection agency will help to rebuild your credit score.

Once you’ve rebuilt your credit, you can concentrate on the other requirements for buying a home such as providing a traditional down payment in the ten to twenty percent range with enough income to afford the monthly mortgage payments, pay for closing costs and still have adequate reserve funds on hand.

Don’t let a poor credit history deter you from applying for a loan. Talk to your Islamic finance lender for suggestions about the best ways to repair or improve your credit.

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