Key Steps to Improving Your Credit Score

Today we are going to revisit ways to boost your credit score.

This is always an important topic and I talk and blog about this often – because it is important. If you are going to obtain the best home loan rate, or if want the best auto loan or credit card rate you need to closely manage your credit score – and aim for the fence! Strive to get your score up above 780 – it is doable if you follow my ideas.

Before I start there is something near and dear to my heart: When you apply for a home loan you need to know that the Lender will check your credit score TWICE – once at the outset and once right before “loan closing.” If you take out additional credit, or if you somehow miss some type of credit payment during the escrow period, your score will go down and it can threaten you ability to complete the transaction. This is a relatively new rule and some people are unable to close their home loans because they had some type of credit event during the escrow period – so be careful!

Improving your credit score can take some time but here are practical steps you can take:

1. Reduce your debts – this sounds easy and practical but too many people live on credit these days -and the amount that you owe compared with your available credit represents 30% of your total score. So the fastest way to drive up your score is to pay down on your debt. If your credit card has a $10,000 cap – make sure you owe less than $3000 – in fact pay the card off if you can. The credit scoring formula LOVES available unused credit! Conversely it HATES a high borrowed amount against the credit limit.

2. Zero out smaller balances – don’t have a bunch of cards (so to speak) with piddly balances – zero them out and keep them that way. Pay cash instead of using these cards.

3. Pay on time – this seems obvious – but if you miss ONE payment resulting in a 30 day late your score can plummet 50 or more points – set up methods to make sure your accounts are paid on time -and better yet pay off all but your mortgage and auto loans – and even have a plan in place to accelerate the paying off of your auto and home loans.

4. Don’t close credit card accounts – leave them open with zero balances – the credit scoring model, as mentioned, LOVES unused credit.

5. Stay clear of credit repair scams – you cannot erase legitmate credit problems like a bankruptcy.

Be Happy! Pay with cash or a credit card that you pay off every month!