Improving and Maintaining Credit Scores
Many times just 10 points on a credit score can save you thousands of dollars over the life of the loan, or in some cases allow someone to get approved for a mortgage. Here are some tips to keep as many points as possible.
Three Important Things You Can Do Right Now
Check Your Credit Report – In order to set a plan in place we need to know the facts. If you think you are credit ready or close, you can start an online application and authorize a credit check. I will review it with you and get started on an approval. If you think that there are negatives on your report contact me and I can direct you to get a free report and we can see what’s on it. If there are errors that can be documented we can get corrections done on our reports through our credit company. DO NOT dispute items with the credit bureaus; this will create an issue that could hold up an approval.
Setup Payment Reminders – Making your credit payments on time is one of the biggest contributing factors to your credit score. Most banks and credit unions offer secure online banking that makes managing accounts easier.
Reduce the Amount of Debt You Owe – This is easier said than done, but reducing the amount that you owe can get positive results very quickly. Doing a realistic household budget can show where some changes can help get credit balances down.
Payment History Tips
Remember, this is 35% of your credit score calculation.
Pay your bills on time.
Delinquent payments, especially recent ones can have a negative impact on your credit score, and can be significant.
If you have missed payments, get current and stay current.
If you have had a financial hardship recently, getting back on track is essential, so you can put that time behind you and show it was a bump in the road.
If you have collection accounts on your report they should be dealt with carefully.
Contact me and we can talk about how to deal with them.
Amounts Owed Tips
Remember, this is 30% of your credit score calculation.
Keep balances low on credit cards and other "revolving credit".
Ideally your balance on all credit cards is no more than 30% of the credit limit. Having balances above 50% of the credit limit is a negative to a credit score.
Do not close unused credit cards at this time.
In fact, they should be used, but sparingly.
Don't open new credit accounts at this time.
Unless the plan is longer term to get the credit score needed for approval.
Length of Credit History Tips
Remember, this is 15% of your credit score calculation.
If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
Opening multiple accounts at once can hurt you in the short term. If you have limited credit opening new credit lines and using them responsibly is part of a long term plan to establish a solid credit history.
New Credit Tips
Remember, this is 10% of your credit score calculation.
Do your rate shopping for a given loan within a focused period of time.
Multiple inquiries in the same time period are looked at as one inquiry when shopping for a car or a home.
Re-establish your credit history if you have had problems.
Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.
Types of Credit Use Tips
Remember, this is 10% of your credit score calculation.
Apply for and open new credit accounts only as needed.
Don't open accounts just to have a better credit mix – it probably won't raise your credit score.
Have credit cards – but manage them responsibly.
In general, having credit (and making timely payments) will help your credit score. Having late payments recently will hurt your score significantly.
Closing an account doesn't make it go away.
A closed account will still show up on your credit report, and may be considered by the score.
Closing an account ca hurt your score since there will be less credit available to you.
Working together we can get the credit report looking good, and put you in a position to get the best mortgage deal for you at the time.
John Lyng is a Mortgage Loan Officer with Supreme Lending. He is experienced with traditional bank programs, as well as alternative programs to help people get into their home. John has a varied background in working with mortgage banks and non-profits, and believes in guiding families to prepare for affordable homeownership.
If you have questions about this or any mortgage-related topic, please contact John Lyng directly at 214-862-3579, or send an email to John.Lyng@SupremeLending.com.
