Here’s how to clean up your credit so you get the
least-expensive home loan possible
Getting the loan that suits your situation at the best
possible price and terms makes homebuying easier and more affordable. Here are
seven ways to boost your credit score so you can do just that.
1. Know your credit score
Credit scores range from 300 to 850, and the higher, the
better. They’re based on whether you’ve paid personal loans, car loans, credit
cards, and other debt in full and on time in the past. You’ll need a score of
at least 620 to qualify for a home loan and 740 to get the best interest rates
and terms.
2. Correct errors on your credit report
If you find mistakes on your credit report, write a letter
to the credit-reporting agency explaining why you believe there’s an error.
Send documents that support your case, and ask that the error be corrected or
removed. Also write to the company, or debt collector, that reported the
incorrect information to dispute the information, and ask to be copied on any
materials sent to credit-reporting agencies.
3. Pay every bill on time
You may be surprised at the damage even a few late payments
will have on your credit score. The easiest way to make a big difference in
your credit score without altering your spending habits is to diligently pay
all your bills on time. You’ll also save money because you’ll keep the money
you’ve been spending on late fees. Credit card or mortgage companies probably
won’t report minor late payments, those less than 30 days overdue, but you’ll
still have to pay late fees.
4. Use credit carefully
Another good way to boost your credit score is to pay your
credit card bills in full every month. If you can’t do that, pay as much over
your required minimum payment as possible to begin whittling away the debt.
Stop using your credit cards to keep your balances from increasing, and
transfer balances from high-interest credit cards to lower-interest cards.
5. Take care with the length of your credit
Credit rating agencies also consider the length of your
credit history. If you’ve had a credit card for a long time and managed it
responsibly, that works in your favor. However, opening several new credit
cards at once can lower the average age of your accounts, which pushes down
your score. Likewise, closing credit card accounts lowers your available
credit, so keep credit cards open even if you’re not using them.
6. Don’t use all the credit you’re offered
Credit scores are also based on how much credit you use
compared with how much you’re offered. Using $1,000 of available credit will
give you a lower score than having $1,000 of available credit and using $100 of
it. Occasionally opening new lines of credit can boost your available credit,
which also affects your score positively.
7. Be patient
It can take time for your credit score to climb once you’ve
begun working to improve it. Keep at it because the more distance you put
between your spotty payment history and your current good payment record, the
less damage you’ll do to your credit score.
G.M. Filisko is an attorney and award-winning writer who
keeps a close eye on her credit scores. A frequent contributor to many national
publications including Bankrate.com, REALTOR® Magazine, and the American Bar
Association Journal, she specializes in real estate, business, personal
finance, and legal topics.
Read more: http://buyandsell.houselogic.com/articles/7-tips-improving-your-credit/#ixzz1fDyL0AYX