Tips About Credit
5 Tips to Boost Your Credit Score
Have you been thinking about purchasing a home sometime this year? As you prepare for that exciting journey, you’ll want to check your credit score. Your credit score, often referred to as your FICO® score (link is external), is calculated using your credit history on file with the credit reporting agencies. No matter what your score is, you can work on boosting it by following a few simple tips.
Your credit score represents the amount of risk a lender will take on. This score will impact your monthly interest and payments on your home loan. Even if your score is in the poor to fair range, there may be loan options available for you. But boosting your credit score before purchasing your dream home could help qualify you for a loan with more beneficial terms.
5 Simple Tips to Boost Your Credit Score
- Check credit reports and fix errors.
It’s free to check your credit report – you can request one from each of the 3 main reporting agencies at AnnualCreditReport.com (link is external). Sometimes your credit history may be inaccurate and could lead to an incorrect score. You can contact credit card companies to correct errors and to ensure that they report the correct account limits as well. You can also dispute claims with the credit bureaus if you find documented reasons to have your score changed.
- Pay bills on time.
Paying your credit accounts in a timely manner makes up about 35% of your FICO score, so make it a priority to pay on time. Make sure you have a good history of on-time payments built up if you have had late payments in the past. Use email or other reminders, or set up auto-pay of bills if necessary.
- Reduce the amount of debt on your cards.
Paying down or paying off revolving debt will definitely help your credit score. Your goal should be to keep balances below 30% of your credit limit on each card. Start paying down the cards that are using higher amounts of available limits first to have more of an impact.
- Manage cards and accounts responsibly.
Having a mix of different types of installment and revolving debt accounts can be a good thing as long as you are managing your debt responsibly. Don’t max out accounts; keep balances low; pay on time; keep paid-off cards open; and avoid opening too many accounts in short amounts of time.
- Re-establish credit history.
If you have had any past issues with credit, start re-establishing a good credit history. Apply for and open new accounts responsibly and work on paying them down or off, showing that you can manage your debt. If you have trouble getting a new account, try starting out with a secured credit card that requires a deposit in order to give you a line of credit to work with.
You’ll be boosting your credit score in no time if you follow these simple tips. Keeping a healthy credit score is important not only for purchasing a home, but also for other types of loans you may need, and is sometimes considered as you apply for jobs or rental housing.
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