Moment of Zen - Improving your Credit Score
Another stressful experience you can endure during your jump into the real estate market is whether or not you will be pre-appoved for a mortage, especially lately with all the changes and stress tests they are putting home buyers through. Here are some ways to better improve you credit rating as well as some tips on what to avoid doing that can drastically affect your score and put you at risk of missing out on a potential property.
Eliminate Your Credit card balances
Don’t have a bunch of credit cards all carrying some kind of balances on them. Carrying that many will affect your credit score. Pay them all off and stick to using 1-2 cards that have the best rates. If all else fails - Consolidate and pay them off. Even consider a personal loan at a lower rate than what a credit card company will charge and pay it off that way, while saving money on interest.
leave old debt on your credit report
Clearing off old debt from your report is actually bad for your credit rating. Contrary to what you may think but this is actually good debt and it shows that you are capable of paying off money you owe. This will be wiped from your report after 7 years anyway. You might as well use it to your advantage.
paying your bills on time
I know this is just simple common sense but be very sure that you are paying your bills on time. Focusing on saving up money for a downpayment is great but don’t forget the little things, missing a payment could be the drastic enough dip on your score to make you miss the deal you wanted.
watch your credit card balances
One major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating. A good rule of thumb is to keep your credit card balances at 30% or lower at all times and pay them off regularly.
use your calendar
It definitely pays to do your rate shopping within a shorter time period. Remember every time you apply for credit, it can cause a small dip in your credit score that will last a full year. Just think if someone is making multiple applications for credit, it usually means they want to use more credit. The FICO score, (it’s a credit score commonly used by lenders), ignores any such inquiries made in the 30 days prior to scoring. If it does find any that are older than 30 days, then it will count those
made within a typical shopping period as one inquiry. The length of that shopping period depends on the credit score used. If the lenders are using newer forms of scoring software, you should have about 45 days, if they’re using the older forms, then you’ll need to keep it to 14 days.
don't "hint" at risk
Now by this I simply mean that you should obviously not start missing payments or start paying less than you normally do per month as this could essentially sink your credit as well. Also refrain from using your cards for taking cash advances, or paying with your cards at businesses that somewhat indicate recent or future money stress, such as a pawnshops or maybe even divorce attorneys.
You should be focused on your credit score when you know that you’ll soon need credit. In the meantime just pay your bills and use credit responsibly. Your score will reflect your smart spending behaviors. Lastly, remember that you’re entitled to one of each of your three credit bureau reports (Equifax, Experian and TransUnion) for free every12 months through AnnualCreditReport.com.Be smart and stagger them, maybe send for one every four months, and monitor your credit for free.