How to Improve Your Credit Score
One of the most important factors into whether you qualify for a mortgage loan is your credit score. It is a number, ranging from 300-850 that lenders use to quickly determine your creditworthiness, or the likelihood you will pay your debts. The higher your credit score, the better. Higher scores allow you to qualify for the best interest rates and more money.
Unfortunately for those with a poor credit score, there are no overnight cures or quick fixes, short of paying off your existing debt and correcting errors on your credit reports. Raising your credit score requires responsibly managing your finances over time. That doesn’t mean there’s nothing you can do today. On the contrary, it means there is no better time for you to start than right now. Even if your credit is not that bad, there are still steps you can take to improve it. Here are several tips and suggestions for improving your credit score.
Check your credit report for errors
Look for misspellings and inaccurate data and report them to your creditor and ask to have them fixed on your credit report. Also, be sure to check all accounts for any you may not remember opening. Identity theft rates have been rising and your credit report is one of the first places you may find evidence of it occurring.
Pay off your debts
As soon as you can afford to, pay off your outstanding debts.
Manage your credit cards, bills, and other debts responsibly
- Keep your credit card balances low if you cannot pay them off. Distribute balances evenly across a number of accounts vs. having a balance near your credit limit on any of your cards.
- Moving a existing balance to a credit card offering a lower interest rate won’t improve your credit score, unless you utilize the lower interest rate to pay off your balance.
- Always pay your bills on time.
- Live within your means. If you don’t have a salary or income that allows you to afford an item or service, don’t buy it. In order to make improving your credit your goal, you may need to make nearer term sacrifices.
- Don’t close existing credit accounts, even if you do not use them. Zero balances may work in your favor by lowering your average balance, but closed accounts will still show up on your credit report.
Don’t open new credit/charge cards you don’t need
Avoid Open Multiple Credit Accounts Within a Short Period of Time
Don’t be lulled into opening a charge card at your favorite local stores, just to save an additional 10%. It’s no bargain for you in the long run.
Opening the account increases your available credit and can hurt your credit score, especially if your credit history is short or you don’t have the income to warrant the additional available credit. Lower credit scores can lead to a higher interest rates for your mortgage, and cost you thousands of dollars.
Shorten Your Loan Shopping Time
Credit scoring software may view loan shopping activity over longer periods of time as shopping for multiple loans, and lower your score. Limit the amount of time you shop for a loan to a few months.
If you are having financial difficulties, you may want to work with a legitimate credit counselor. Avoid those promising quick fixes or instant solutions to all your credit problems. Improving credit problems takes time and effort. Working with a credit counselor will not improve your credit score, but it may give you the help needed to begin managing your finances more responsibly and pay off your debts in a timely manner, which will help to improve your credit score in the future.
When you are ready, find out what you need to qualify for a loan and apply!