Top 5 Ways To Improve Your Credit Score
Better Credit Equals Bigger Opportunities When It Comes To Buying a House
While there are some cases where your low credit score is a result of situations in your life that you can’t control, such as job loss, divorce, or other negative financial impact, there are many of us who simply don’t have a whole lot of discipline when it comes to making sure our credit score is as high as it possibly could be.
Before we get into the things you can do to improve your credit score, we should talk about how your credit score is sinking. Unless it’s due to one of the uncontrollable issues that we mentioned above, it could be that you’re not paying attention to your spending habits. In some cases, we feel so overwhelmed by what we feel is our “fate” of bad credit, it only takes a bit of planning, discipline, and patience to begin to turn things around.
If it’s your desire to own a home, a lender will look very closely at your credit to determine your risk. We touched on this subject in our last article. Even if you have a good Debt-to-Income ratio, there may be other factors that affect your score, such as late payments, derogatory information, or high credit debt compared to the credit you’ve been granted. Consider looking at your expenditures closely and see what you can reduce in order to put more toward an improved credit score.
5 Things You Can Do To Improve Your Credit Score
Remove derogatory information.
We’re going to assume that you’ve requested a free credit report from one of the three credit reporting bureaus:
Derogatory information refers to any item(s) on your credit report that reflect negatively, such as late payments and charge offs. However, if you’ve rectified these issues and they still show up on your credit report, you can call the credit issuer and ask them to remove it from your report. If you haven’t fixed these derogatory items, contact the credit issuer to try and make arrangements to clear up the issue.
Make your credit payments ON TIME.
This seems like a given, but we tend to overlook the obvious. There are some out there who don’t realize that late payments, even under 30 days late, may affect your credit score.
Two ways to make sure you pay on time: One is to set up automatic payments through your bank. If you’re not ready for that, then set up a calendar system to remind you when your payments are due.
Make double payments.
Based on your particular financial situation, this may not be easy. However, you can drastically cut down your finance charges if you make a credit card payment every two weeks, rather than once per month. This means your balance will be paid off faster.
Throw “windfall” money at your credit balances.
Holiday bonuses, tax refunds, gambling winnings; If and when you get them, hit those credit card balances.
Stop applying for new credit.
One other potential pitfall for credit scores is the number of inquiries to your credit report. This can happen whenever you apply for credit. The more inquiries, the greater potential for risk as seen through the eyes of your lender.
Want more ways to reach your home buying goals?
Contact me for a free, no obligation consultation.