Credit scores are increasingly more important decade after decade are basically a part of you in today’s society. The score you should be striving for is min 620-640 and there are some programs for less. But the higher the credit score, the easier it is to get loans and get better rates.
Improving your credit can take time, often many months. But there are some things you can do to raise your credit score quickly, even if only by a few points. Here are some tips:
Pay Bills on Time
Payment history is the most important factor in FICO scores, accounting for up to 35 percent of a credit score. Paying your bills on time—regardless of whether it’s a credit card bill or a utility bill—can significantly improve your score.
Late payments stay on a credit report for seven years. The longer ago they happened, the less they affect credit scores. If a bill goes unpaid long enough, the debt can be sold to a collections agency and will get reported to credit bureaus.
Maintain Low Balances
Keeping a low balance lowers your credit utilization rate, which is the amount of credit you’re using. Also called credit usage, it is the second most important factor in credit scores and accounts for 30 percent of a score.
Your credit usage is calculated by dividing the total of your balances by your total credit limits. For example, $3,740 in credit card debt divided by $16,000 in a total credit card limit equals 23 percent usage.
Paying off the balances in full each month should keep the credit utilization rate low, which should preferably be at no more than 30 percent on any one card or in total.
Increase Your Credit Limit
Another part of credit usage is how much your credit limit is. Increasing your limit in small increments by getting a new credit card can lower your credit utilization rate by giving you more money to use. You could also ask your current credit card provider to increase your credit limit. However, using that higher credit card limit could increase your credit usage, so you may want to use it rarely and pay it off in full each month.
Keep Credit Card Accounts Open
Age of credit history has a 15 percent impact on a credit score. Creditors and lenders like to see an average account age of more than five years. Keep your older accounts open to get over the five-year average. While this isn’t a quick step to improving your credit score, it’s worth keeping in mind for the long-term health of your credit. If you want to see faster results, start by paying your bills on time, using less of your available credit, and ask for a credit limit increase.
If you’re intimidated to start the process because you think your credit score isn’t high enough, you could be underestimating yourself.
KeyPoint
“You should never assume your credit scores are too low,” said Ulzheimer. He advises consulting a mortgage lender to see if there are loan programs that fit your credit profile since there are options for first-time homebuyers or applicants with less-than-stellar credit.
Remember, you are more than just the number on your credit score. But since credit is a concept that doesn’t always have clearly defined parameters, navigating the home-buying journey can feel complicated. We are here to help.
Contact Harry Eaves at 310-367-9998