When shopping for a home, a higher credit score could save you thousands over the life of your mortgage. And if your score is too low, you may not qualify for a mortgage at all. That’s why many home shoppers want to increase their credit scores as much as possible. Whether you’re like many Americans who struggle with bad credit, or you want the best deal possible for your home loan, you can take steps to improve your credit-worthiness. Let’s take a look at the common sense strategies that financial experts suggest to boost your credit score.
1. Always pay your minimum balance on time.
Let’s face it, credit card companies make profits on you when you maintain a balance. Just make sure you send them their due each month. Better yet, only spend what you can expect to pay back at bill time.
2, Try to reduce balances.
Even throwing in an extra $20 to $50 each month will help reduce the overall debt, and paying extra looks good on your credit report.
3. Don’t run up the entire balance.
Having $100 left on a $10,000 line of credit doesn’t look so hot. Lenders look at the dollar amount of credit available to you and, from there, what percentage of that credit you have used. In other words, if you have a card with a $1,000 limit and you’ve spent $900 on that card, you’ve used 90% of your available credit; this looks a lot worse than having a balance of, say, $200 on the card.
4. Throw away new credit card offers.
Don’t apply for new cards and lines of credit right before you go home shopping. And when those clerks in the stores offer you a discount if you just open an account, say no. Banks will not turn a blind eye to numerous inquiries for new credit.
5. Check your credit report and fix credit mistakes
In addition to cleaning up your debts, you also need to check your credit report to make sure it is accurate. This is important: Items that are just plain erroneous can stay on your report for up to 10 years if they are not disputed. Even if you have bad credit, you may still be able to obtain a mortgage – view our resource page on getting a mortgage with bad credit.
By disputing items on your credit report, you put the wheels in motion to clean up the report and get a better mortgage. Your credit bureau will attempt to get the disputed items deleted from your report by contacting the creditors involved. After 30 days, if the creditors do not respond, the item is deleted from the report. You can also contact the creditors yourself.
6. Don’t close all your old credit card accounts
Did you know that the length of your credit history is factored into your credit score? So if you have credit cards with a history of on-time payments, keep them open, even if you don’t use them any more.
