Tips To Improve Your Credit Score
No matter where you are on your journey to buy a home, whether you’re about to sign your closing documents or just beginning to explore your options, one of your major areas of focus–and indicators of readiness–is your credit score.
If you haven’t taken a look at your credit score recently, you can use a free service like our partner Credit Karma or Annual Credit Report to obtain your current score. If you’re less than thrilled with what you find, don’t fret–there are a number of things you can do to get back on the right track and raise your score.
The first and perhaps most obvious way to start improving your credit score is to ensure you make credit card and other loan payments on time. If you were down on your luck in the past and missed a few payments, consider calling your card issuer and ask to have your record cleaned up.
Paying outstanding late balances will sometimes give you the negotiating power to either have your account marked as “paid as agreed” or, better yet, have late payment information expunged completely.
Credit cards can and will actually improve your score, but only if used responsibly. Try not to utilize more than 30% of your available credit on each account if possible to maximize this portion of your credit score. If it’s a little out of balance, consider asking your financial institution to increase your line of credit–but only if it won’t tempt you to whip out the plastic more.
Try not to close any revolving accounts either, as this can have a negative impact on your credit score. If you must shut down an account, make sure you ask, in writing, to have your account marked as “closed by account holder” in order to avoid raising any red flags with the credit bureaus.
Diversifying the type of accounts you have open–and keeping them in good standing–will also put you on the road to success when it comes to keeping your credit in check. For example, a car loan, small personal loan from a bank or credit union, and a couple of credit cards is considered a healthy mix of credit from a variety of sources.
If you’re looking to improve your credit or take other steps necessary to achieve the goal of homeownership, tools such as Nestiny’s True Affordability Tool and Journey Homeward can help you self-assess your readiness to buy and learn the steps to take to get there. If you need additional help with your credit, check out the helpful resources online like our partner Credit Karma or speak with your real estate agent who can advise you further in your local market.