Top 3 Ways to Improve Your Credit Score
We all know the importance of a good credit score when it comes to purchasing a home. Simply put, a good credit score saves you money in the long run. Those with scores above 700 are golden when it comes to obtaining the lowest rates for mortgage loans, car loans, credit card rates and even random benefits such as reduced car insurance or better cell phone rates.
Your overall credit score is determined by a variety of components. According to The Fair Isaac Corporation (FICO), those components www.thecreditrepairblueprint.com/the-top-5-ways-to-increase-your-credit-before-applying-for-a-mortgage/are divided up among your payment history which can account for up to 35% of your credit score, outstanding debt at 30%, credit history at 15%, credit inquiries at 10% and types of credit in use, also at 10%. The national average credit score currently floats around 665.
The big mystery of improving one’s credit score isn’t really much of a mystery at all. There are some key things you can do to easily take the first steps towards improving your long term credit score.
#1: Pay early and extra
Ideally, pay your credit card bills in full each month and be sure to mail your check early so it is applied a few days before the due date listed on the statement. In doing so, the creditor will have already processed your payment and your balance will be reduced to zero before they report data to the credit bureaus. If your check arrives after the due date, the creditor will report the full balance due, even though your check is in the mail and you may still be within the typical grace period.
#2: Increase your credit limit
Up to 30% of your score is determined by something known as credit utilization, or how much of your available credit you’re actually using. Let’s say you have 3 credit cards with a combined credit limit of $6,000 and you typically charge and pay off about $2,000 per month. While this is a good scenario, it would be even better if your combined total was $30,000 and you still used about $2,000 per month. This is somewhat of an industry trick and although it can be helpful to improves one’s score, it should also be noted that many other factors come in to play. Of course if you increase your credit limits and also start maxing out your cards, this benefit will be lost.
#3: Keep those old cards and use them occasionally
Most people think it’s better to close out old credit cards, but in fact, doing so may actually hurt your score. As mentioned above, a higher credit limit can actually help your score and those older accounts increase the overall length of your credit history. Cards with no activity over a lengthy period, say 6 months or 1 year, will most likely be reported as inactive on your credit report and therefore, will not be calculated into your score. Say your old credit card from college, with a $5,000 limit, is one such card. This old credit history and extra dollar limit would be beneficial to your credit score. Start using and paying off that older credit card occasionally to see benefits to your score.
These 3 easy tips will help improve your score and save you money when it comes time to buy a home. As you research houses for sale you can feel more confident that you’ll get the home of your dreams if you take the necessary steps to improve your score first.