7 ways to improve your credit
Credit scores, along with income and debt load, sum up how well a person has managed credit and whether the person represents a good risk for a lender. The most common credit scoring model used today is Fair, Isaac and Co’s (FICO). The big three national credit repositories - Equifax, Experian, and TransUnion - rely on it. The scores typically range from 300 to 900 with a higher score indicating a better credit risk.
If you understand your credit score, you’ll be better able to secure competitive mortgage rates.
To improve your score:
- Wait 12 months after credit difficulties to apply for a mortgage. Some items are scored less heavily after 12 months.
- Don’t order home furnishings or appliances during the mortgage application process. The balance owed will be counted as debt.
- Pay back taxes in a lump sum to reduce your overall level of debt.
- Avoid finance companies, which charge high fees and rates. Their use is considered indicative of poor credit management, even if the borrower pays the loans back on time.
- Shop for rates all at once. Multiple inquiries from the same type of lender are scored as a single inquiry if received within a short time period.
- Don’t open a lot of credit card accounts quickly to build a credit record. Doing so lowers the average account age and looks risky to the scoring model.
- Pay down credit card balances. However, off-loading credit card debt to a new card with a lower interest rate isn’t considered good credit management and also results in another credit inquiry that will lower your score.
These tips are compliments of Realtor® Magazine.
