How To Improve Your Credit Score

Credit Score Pie Chart

          Credit Score Pie Chart

7 Ways To Improve Your Credit Score

Make a Plan of Action

Get a Credit Report and look for errors in identity or line items. Thanks to an act of Congress, you can download one free credit report each year  at  www.annualcreditreport.com . If you find any credit report errors, even small ones, correct them immediately. Follow-up and contact the credit reporting agencies. Challenge inaccurate reporting.

Pay Down Debt

Paying down debt can save interest charges and lower your ratios. However, you might be better off using funds for a down payment or to pay your car loan down to 10 payments than to pay down a credit card. We suggest that you talk to a home lender to determine where best to use money you have available. We’d be happy to refer you to a good lender.

Credit Cards

Pay off small credit card balances and close those cards. Keep using 1-2 major cards. (You need open credit lines.) Department store credit cards- even with a zero balance- will have the minimum payment added to your ratios. While it may seem like a good idea, transferring credit card debt from one card to another can lower your credit score. Do not max your credit cards. Do not open new accounts!

Wait 12 months after credit difficulties to apply

Twelve months removes many dings from your report and can raise your score. The difference in interest rate is probably worth the wait- depending on your score. There are plateaus like “over 720” and “under 680” etc. Again, we suggest a free consultation with a home lender. It’s also a great way to interview them to see if you’d work well together in the future.

Always avoid finance companies

Even if you pay off their loan on time, the interest is usually high and it may be considered a sign of poor credit management to a home underwriter.

DON’T MAKE NEW PURCHASES UNTIL CLOSING ON YOUR HOUSE

I can not say it enough! Do not buy a car or home appliances or furniture or spend cash until you own your new home. Usually this will increase your debt ratio and/or credit score which could be very bad. So, because you are unique, at least agree to consult your home lender FIRST.

New credit accounts and lowering your credit limits

New accounts affect your credit score: you lose points for the credit inquiry, for the open line and for unused available credit. Just a few points for each thing could raise your credit score subsequently getting you a higher interest rate. Another thought- if you don’t want to close a credit line, consider lowering the credit limit.

Shop for mortgage rates all at once

Credit report inquiries can lower your FICO score. We suggest getting your credit score (FICO-see above) and calling 3 lenders/banks for rates all on one day. By giving them your average credit score number, they can use that to quote interest rate and fees. Whatever lender you choose can then run your credit. We suggest that you get quotes from your Las Vegas credit union or bank’s home loan division, a friend’s home lender and a lender we refer you to. (See our blog on this.)