How to raise your credit score quickly before your mortgage application
by Rick Delgado
on Wednesday, September 28th, 2016 at 8:29am.
When it comes to mortgages, good credit can make or break your application. Having a good credit score will also earn you better interest rates, and better access to loans. What many people do not realize is you can raise your credit score quickly. If you do not have any black marks against you like a foreclosure or bankruptcy, you can improve you credit score within a couple of months. Here are some measures prospective homebuyers can take to raise their credit score.
Dispute any errors on your credit report
Errors on credit reports are more common than you think. Whether it's a case of mistaken identity or a bill showing as unpaid when it was paid in full, you should always dispute any errors on your credit report.
Pro tip: Don't have access to your credit report? You can access it for free, once a year at annualcreditreport.com.
Pay your bills on time and in full
One of the easiest ways to improve your credit score is to always pay your bills on time and in full. Credit scores are largely based on your credit report which documents your payment history. A good payment history will improve your credit score whereas late or outstanding payments will damage your credit score.
Pro tip: If you're not naturally organized, set up automatic withdrawals with your bank for your monthly bills.
Apply for a secured credit card
If you have no credit or bad credit, getting a secured credit card is a good way to start building a good credit history. While they do require an upfront security deposit, pretty much anyone can get one. The main benefit to having a secured credit card, is that your payment history is sent to credit agencies, which can improve your credit score if you maintain a good credit history.
Pro tip: Read about the top 5 recommended secured credit cards here.
Keep your credit card balances under 30 percent of your limit
In other words, never max out your credit cards. As a general rule, never spend more than 30 percent of your credit limit. Even if you pay your balance off in full every month, credit bureaus will see you as an irresponsible spender, which can negatively affect your credit score.
Pro tip: If you need to spend more than 30 percent, consider getting second credit card to split the balance between both cards equally.
Break up credit card payments
Most credit card companies report to creditors once a month. So even if you pay off your balance on time every month, that might not necessarily translate onto your credit report. For example is you purchase a big ticket item and charge it to your credit card, that high balance could be reported to your creditor before you pay the bill. One way to prevent this, is to break up your credit card payments, so that you're paying off your balances twice a month. This keeps your balance amounts low, which is better for your rating in the long run.
Don't cancel unused credit cards
If you have a credit card that you barely use, don't cancel it. That can actually lower your credit score. Instead, put the card to use to improve your credit by creating a long credit history. Having several well managed credit cards does more to improve your credit score rather than just a single card.
Pro tip: If you don't use your card regularly, your payment good history may no longer be sent to credit bureaus. Keep your credit card active by using it to pay for a recurring charge like a cell phone bill or a car insurance payment.