Top Tips for Improving your credit score
If you want to apply for a mortgage to buy a home or refinance you will need a good credit score to get the best rates. The higher the score, the more appealing your mortgage application will be to banks and lenders. Here are some tips to help you boost your credit score:
1. Paying on time- Most important factor in achieving a good credit score is to pay your bills on time. Delinquency can severely impact your credit score in a negative way. A delinquency remains on your report for 7 years. Payment history is the most important factor in your credit score so showing that you are reliably making payments to your debt obligations on time will look good to lenders.
2. Have Credit History- In order to have good credit, you need to have credit history. Having available credit lines is a good thing especially if there is little or no balance on the cards. Many people mistakenly think that having no credit cards or loans is good for your credit score. What is actually good for your credit score is having open credit cards with low to zero balances and loan history. Don’t close unused cards, keeping them open and balance free will help increase you score.
3. Pay down your credit cards- Paying down (and ideally paying off) your credit cards and other debt can greatly improve your credit score. It is best to have your credit card balances below 30% of the card’s credit limit. If the percentage is even less of course, that’s even better. High debt on revolving credit can adversely affect credit scores.
4. Keep credit inquiries to a minimum- Too many hard inquiries on your recent credit history may make Mortgage Lenders concerned that you are planning on taking on new debts. Don’t worry about shopping around for the best mortgage loan rates however. The scoring systems take into account that people like to shop around for the right loan so multiple inquiries within a short period of time only count as one inquiry. Checking your own credit, having your credit checked for employment, and “Pre-Approval” offers have no negative impact on your credit score.
5. Average Account Age Matters- Don’t open a lot of new accounts around the same time. Part of your credit score is based on the average age of your open accounts. Having too many new accounts can decrease your credit score average.
6. Check Your Credit Report- You can request a free copy of your credit report annually form the 3 credit reporting agencies (Experian, Equifax, and Transunion). Since your credit score is calculated from the information in your credit report it will help you to understand and target goals for improving your score. Don’t forget to check for errors and if any are found, dispute.
7. Time- Improving a credit score is not an quick and easy task. It takes time, consistency, and financial responsibility. Making positive financial adjustments like the recommendations on this list can help bring along positive change.