Mortgage 101: 10 Ways to Improve your Credit Score
by Rick Delgado
on Thursday, August 25th, 2016 at 10:13am.
As every homebuyer who is seeking for a mortgage knows, your credit score is an important and crucial part of buying a house. That's mortgage 101. Those with higher credit scores are able to obtain loans faster and are able to take advantage of very favorable rates, making buying a house less stressful and more enjoyable.
If you are in the market to buy a house and your credit score is less than desirable, there are ways you can increase your credit score so you can take advantage of the best rates available.
Here are 10 ways you can improve your credit score:
Check your credit report for errors
This is the perhaps one of the easiest ways to improve your credit score. With so many people with similar names and the increase of identity theft, check your credit report to make sure everything listed is yours. If you do see an error, contact the credit bureaus immediately and have it fixed or taken off your credit report.
Don't miss bill payments
This may seem like a no brainer, but paying your bills on time is one of the easiest ways to improve your credit score. If you're bad about paying your bills, think about setting up automatic recurring bill payments with you bank. That way your bills will be paid before they are overdue. You bills will be paid without you lifting a finger.
Pay down existing credit card debt
Similar to paying your bills on time, make a point to pay down your existing credit card debt. By reducing your overall debt, you'll give your credit score a quick boost. If you can't afford to make payments on your debt, consider taking a small loan from a family member or friend. You'll still owe the same amount, but the debt won't show up on your report.
Use the 10% Rule
Part of maintaining a good credit score is to not max out your credit limit. To maintain a high credit score, you should only be spending less than 10% of your overall credit limit. Even if you do pay off your credit cards at the end of the month, depending on when your credit report is pulled, your credit liability may still be too high. Instead of waiting for the end of the month to pay off your bills, you should pay your card throughout the month to show a lower balance.
Use your credit cards
Maintaining a good credit score means learning to maintain your existing credit. Most people assume that by not using your cards, it will increase your score, but the opposite will happen. Banks like to see you use your credit wisely, so if you don’t use your cards, you cannot prove that you can be responsible spending and paying your credit cards on time.
Increase your credit limit on your existing cards
Credit line increases can improve your credit utilization ratio, which in turn translate into a higher credit score. This will also help you maintain that 10% overall credit limit. Move onto this step ONLY if you are able to manage your spending habits.
Don’t apply for too much credit
Applying at every department store that offers you a card is not a smart idea. Have a handful of cards only, and use each one responsibly. Each time a card is issued to you, you get hit by a deduction in your credit score, so limit your credit card accounts to only a few.
Don't cancel credit cards
Think twice before cancelling a credit card because each time you do, you will cause your available credit to drop. And that never looks good when you're applying for a loan. What if you're not using your card on a regular basis? One way to keep your credit card active without using it on a regular basis is to use it for a recurring bill like a utility or phone bill.
Pay your parking tickets
Parking and speeding tickets may not seem like a big deal, but when unpaid fines get sent to collections, they can seriously hurt your credit score. The same goes for unpaid library fines. So if you have unpaid fines, pay them off in full to avoid being surprised by a nasty collections account down the road.
Enlist professional help
When in doubt, hire a credit repair service to help manage your debt. These professionals can help you dig deeper into negotiations to improve your score. Best of all enlisting their help will not negatively affect your credit score.
For more advice on how to improve your credit score or how to best obtain a good mortgage, contact Rick Delgado with RE/MAX Gold at (916)226-1136 or visit www.HomesForSacramento.com.