Many of the following ways to improve your credit score are known by you already. The problem is that you keep ignoring them. Well, now, you’re buying a home soon, and you know you better get started in fixing and boosting your credit.
Home lenders put a big weight on your credit score. Many of them even give you a lower interest rate if your credit score is much higher than their minimum. They will of course still consider other factors like your income, assets, down payment, loan to home-value ratio and debt-to-income ratio, but your credit score is a number that stands out among your other figures.
Take a look at these tips — there could be something you haven’t read about before.
1. Lower your credit card debt to 30% of your credit line on each of your cards.
If you can reduce it to 25% or lower, it will be a big boost to your credit.
2. Pay each of your bills on or before due date. Late payments, even for only a few days, can drastically lower your score.
3. If you missed some payments, try your best to recover fast. Religiously commit to pay on time all your bills so that as months go by, your late-payment record is pushed back further and further to where it has no more big impact.
4. Don’t close unused or rarely used credit cards, as closure will increase your utilization rate or the ratio of your total debt to your total available credit.
5. Don’t apply for new credit cards just for the purpose of increasing your available credit.
6. Pay off in full the balances of your credit cards with small balances. This will reduce the number of your credit cards with balances.
7. Don’t call the credit bureaus to remove a paid-off debt from your credit report. Your good payment history on this particular debt is just like an A rating on your report card.
8. Do your best to prevent your debt going into collection. Always remember that even if you’ll be able to negotiate and pay off your debt later on, your collection account will stay in your report for seven years.
9. Taking out a small loan from your credit union and paying it on time will help boost your score.
10. If you need to use more than half of your credit limit, pay back part of what you used as soon as you have the money, and do not wait for the due date. This will restore your utilization rate to its lower level.