Four Easy Ways To Improve Your Credit Score

When planning to purchase a new home or refinance an existing mortgage, you’ll need to meet minimum credit score requirements. Even if you meet the requirements, you’ll find that the higher your credit score, the lower your interest rates. This means, depending on what your credit score is now, improving it could equal a savings of hundreds of dollars each month and thousands of dollars over the life of the loan.  

If you know that you need to improve your credit score, keep in mind that it takes time and requires discipline to get to your desired score. Whether you’re just starting out, or maybe you had some setbacks which led to you having bad credit, here are four easy ways you can improve your credit score. 

  1. Check Your Credit Report

First, you should know what your credit score is and why. The best way to learn is to access your credit report, which will show you your FICO score and all accounts you have. Your credit report will also show your payment history for the last seven years, along with the balances on each account.  

When checking over your credit report, make sure the balances on your account are accurate and make sure there are no unfamiliar accounts. If you find anything that looks unfamiliar, you can file a dispute. Depending on the error and how much it was affecting your FICO score, this could help improve your credit score significantly and can be resolved in as quickly as 30 days.

2. Make Payments On Time

Paying your bills on time makes up the most significant scoring factor when determining your FICO score. Payments later than 30 days get reported to the credit bureaus and negatively impact your score. Of course, you can’t go back in time, so if you have missed payments, you can’t change that- you can only be better as you move forward. 

To help make it easier to make your payments on time, consider setting up autopay through your bank. This way, if life gets busy, you won’t have to worry about a payment slipping through the cracks causing your FICO score to drop. 

3. Pay Down Your Debt

The second-largest factor in determining your FICO score is how much credit you have used versus how much is available. Ideally, your credit cards should have a balance of 30% or less than the maximum limit. For example, if you have a credit card with a $10,000 limit, you need your balance to be $3,000 or less.  

If you have multiple credit cards and your goal is to increase your credit score, you should focus on getting the balances on as many cards as possible below that 30% mark. Each time you make a payment and the balance decreases, your score should inch up ever so slightly.

4. Increase Your Credit Lines

If you want to get moving on your home purchase or refinance and don’t have time to pay down your debt, you could also ask for a credit increase. This way, your balance will remain the same, but the credit utilization ratio will look more favorable, which will lead to a higher FICO score.

To receive an increase in your credit limit, your credit card company will likely require you to have a good payment history and will ask for you to update your income. There is a chance they will also run a credit check, which will ding your FICO score a bit, so keep that in mind.

If you’d like a more personalized game plan on how to increase your credit score, give me a call. I am happy to help you get started to take advantage of lower interest rates once you are ready to buy or refinance a home. 

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