Credit Scores

When it comes to improving your credit score, no there’s no one solution that fits all.

Just like the home buying process, remember every person's credit journey is unique.

There are many factors that apply to most consumers, but they won’t always impact everyone’s credit scores in the same manner.

#1 - Check your credit report for accuracy.

The first step in improving your credit score is to be aware of what’s on your credit history. It’s not unusual for there to be mistakes on a person’s credit report. Even if you believe your report doesn’t have any problems, it’s a good idea to check it regularly. If you want to dispute a mistake, you can contact the creditor.

#2 - Ask to have negative paid off entries removed from your credit report.

Sometimes you make mistakes and forget to pay a pill or are late on your student loans. Of course, we hope to learn from these mistakes. However, for late payments, you can draft a "goodwill letter" which is sometimes referred to as a "goodwill adjustment." If you generally have a good history with a creditor, they may be willing to forgive a late payment here and there.

#3 - Pay credit card balances strategically.

If you have the funds to pay more than your minimum payment each month, you should do so. Revolving debt has a major impact on your credit score. Chipping away at it helps keep your credit utilization rate low (the percentage of your total credit that you use). You want to try and keep the utilization ratio below 30%, the highest scorers use less than 7%.

"A person's credit reports is one of the most important tools consumers can use to maintain their financial security and credit rating, but for so long many did not know how to obtain one, or what to do with the information provided."

#4 - Increase your credit limit.

When you raise your credit limit your balance stays the same, which instantly lowers your overall credit utilization and can improve your credit.

#5 - Become an authorized user.

This one is huge, and something I will be doing for my kids but can also work for adults. As a kid if your parents are taking care of their credit cards, them adding you as an authorized user builds your credit, and boom when you turn 18 you have a 700-800 credit score. As an adult if you are trying to build your credit and have a close family/friend who has a credit card account with a high credit limit and a good history of on-time payments, that adds to your credit reports and can help your utilization. It is also called "credit piggybacking."

#6 - Pay your bills on time.

This one seems like common sense, but easily looked past. Late payments can stay on your credit reports for 7 1/2 years.

#7 - Deal with collections accounts.

You can remove collections accounts from your credit reports if they aren't accurate or are too old to be listed. Also, contacting your creditors and paying off your debt is a great way to raise your credit score.

TIP: Make sure that they agree to remove the negative hit to your credit report if you repay it in full—and get it in writing.

#8 - Get credit for rent and utility payments.

For most companies, the default is not to report your payments to credit bureaus. However, you can invest in a service that helps ensure your on-time payments for utilities and rent can be added to your report and potentially positively impact your credit score.

#9 - Apply for a Credit-Builder Loan.

A credit builder loan is geared toward borrowers with no credit history who don’t want to open a credit card. To use a credit builder loan, you first decide on the amount and term. Instead of receiving the money upfront, every month you make a payment to the lender, and they report it to the credit bureaus. When the term is completed, you receive back the amount you paid, minus possible fees.

Talk with a lender!

Talking with a lender is always a great idea when looking to raise your credit score in preparation of buying a home. They can help you pinpoint what tricks and tasks will help you specifically!

If you're looking to get in touch with a lender, reach out and I will connect you with a few amazing ones in the FM area! When talking with mortgage lenders it is always good to talk with more than one, some have better options available for you than others!