Improve Your Credit Score
Your credit score is a crucial piece to the puzzle when purchasing or refinancing a home mortgage.
The lower the credit score, the less likely you will be able to get approved by a lender. Scores range from 300 to 800. There is tons of information on the internet explaining the scoring system. The basics are 620 and below are considered high risk. You will have to do a little work and get the score up if you want to qualify for a low interest rate. However, there are programs available for 580 – 620 scores. If you are in that category then do a little extra homework and find out your options. 700 scores and above are considered low risk and will be able to qualify for the best rates.
Important key points on how to improve your score.
- Always pay your bills on time. Paying late or not at all can have a huge negative impact on your credit score.
- Keep your balances at the most around 30% of your overall credit limit. An example is if you have a limit of $1,000, don’t carry over more than $300 into the next billing cycle. Keep it around $300 or less. Paying the minimum payment due will not help you achieve a strong track record. It makes it seem as though you are scraping by.
- Don’t open a new credit line just to get the one-time 10% off your purchase. Only open new trade lines if they are needed. (When in the market to buy or refinance a home, opening new trade lines are discouraged)
- Request copies of your credit report from all three agencies. The three bureaus are Experian, TransUnion and Equifax. Once you receive them, go over them very carefully to determine if there is any incorrect information reporting. If there is, follow the individual credit bureaus instructions on how to dispute the information. Incorrect information can really hurt your score. Correcting it is in your best interest, especially if you are in the market to refinance or purchase.
The best advice for improving your credit score is to know what it is. Research any questionable information and take action if necessary.
Below are great resources to bookmark for managing your credit score.