Improve Your Credit
Lenders have been tightening up credit requirements, creating a challenging environment for some potential homebuyers. Higher unemployment, a slow economy and a battered housing market have all been contributing factors to the current credit crunch.
While there is no way to get a perfect credit score overnight, these five steps can give you a significant credit boost that may help you in your search for a lender.
Five Credit Boosting Steps
1. Pay your credit cards down. It may not be possible to pay off all of your credit card debt this month, but reducing your debt can improve your credit score. Paying your cards down to below 30 percent of your limit will make you more attractive to lenders and will raise your credit score.
2. Use your credit cards wisely. Many people use credit cards to pay their monthly bills and then make one large payment at the end of each month. Credit formulas don’t always take this into account, however. If they detect a large balance on a card, it can count against your credit score, regardless of whether or not you regularly pay the balance down each month.
3. Pay your credit card balance down before the end of your statement period. Differences in when and how often lenders report monthly transactions (including payments you make) can cause some confusion about your credit behavior. Because credit limits aren’t always available to other lenders, regularly high balances can be viewed as a perpetual maxing out of your credit account (regardless of whether you pay it down each month). Making your payment before the end of your statement period can help your balance look manageable and your credit activity responsible to lenders.
4. Keep your old credit accounts open. Old credit is good credit. The longer a credit account is kept open and responsibly managed, the more positively it affects your credit score. Make sure to use your old cards periodically and pay them off, as well. Dormant cards can receive lower scores than ones that are used from time to time.
5. Resolve mistakes and disputes early and often. If you have been incorrectly billed, have a disagreement about a transaction on your credit account, or are mistakenly billed for a late payment, call your credit card company right away. The sooner these disputes are resolved, the sooner your credit can return to normal, and the more impact your payments will have. Mistakes and disputes can build up and create problems down the road that can negatively affect your credit score.
Hopefully these five simple tips will help you maintain a healthy credit score.