How To Improve Your Credit Score
Before you purchase a home, you will want to know your credit score. Your credit score can impact the type of loan you can get. If your credit score is not as good as it can be, it can negatively impact your interest rate. By finding out your score before you buy, you can take some steps to improve your credit score and improve your chances of obtaining a great loan at a great interest rate.
Once you have a copy of your credit report, review the steps below to get started on repairing your credit and improving your score
The most important thing you can do to improve your credit is to pay your bills on time.
If you have accounts in good standing, keep them that way!
Paying balances on your credit cards down can provide a quick boost.
Start with the cards that have balances closest to the credit limit.
Try to keep your card balances down to 30% or less of the card's limit: for every $1,000 of available credit, try to use less than $300.
Keep existing accounts that have zero balances open versus closing them.
Naturally people are inclined to pay off their credit cards and then close the accounts so that they do not fall back into the same trap of over spending etc., but this will have a negative impact on your score as one of the major impacts on credit score is your available credit vs. your outstanding balance.
Use all of your cards a little, instead of some of them a lot.
This way when you make your payments on time, you will receive positive feedback from more than one company.
Make sure that you have a "positive feedback providing" credit card company.
The perfect example is American Express: they only report negatively to the credit bureaus, so while they will report your late payments to hurt your credit, they won't report that you're making your payments on time.
Pay off collections and judgments.
Nothing can hit a good credit score harder or faster than a collection or judgment.
Paying off legitimate collections or judgments can have immediate benefit toward your credit score.
Monitor your credit during the repair process, this way you can track your progress and see immediate reward in your efforts.
If you identify any inaccurate items, file a dispute directly with the credit bureaus reporting that item. Be sure to remove disputes prior to starting your loan process.
After your credit is repaired, take advantage of the free annual credit report every consumer is entitled to so you can continue to take control of your credit and be proactive with inaccuracies.
You do not have to carry a balance on your credit card to have good scores.
However, having and using a credit card or two can really build your scores.
One recommendation is charge one tank of gasoline per month on your credit card and then pay it off on your next bill. You can easily control overspending habits if you plan ahead on what you are going to charge and how you will pay it off.
If you cannot qualify for a regular credit card, consider a secured credit card. Behing added as an authorized user on someone else's credit card can be useful to improve your score, but only if their credit is pristine. This option can't be used to substitute for no credit, but it can help your credit score.
Seek credit counseling, not debt consolidation.
If you need help there is nothing wrong with askijng for it as long as you avoid debt consolidation.
Debt consolidation often times has a very negative effect on your credit. Credit counselors are free and can help you budget in a manner to pay off your debts and get your credit under control.
Read our understanding credit page to get a better understanding of how credit works.
Once you have a better understanding of how credit works, you can avoid falling into the same scenario in the future!
Since every situation is different, it's always best to talk to a Loan Specialist who can help you review your credit report and identify problem areas.