Have you checked your credit score lately? Having good credit is important in this world, particularly if you plan on buying a home. Even though there are mortgages available to those with lower credit scores, it’s always a good idea to raise your score as high as you can before you apply for a mortgage. A higher score will yield a lower interest rate and less money you have to put down.
What are some basic ways to get your score higher?
- Pay Bills on Time
Of course we always hear this. But it can’t be stressed enough how critical it is to you overall score. In fact, it makes up 35% of your score. If you have trouble remembering due dates, try setting up automatic payment, or use a bill pay service from your bank.
- Correct Errors on the Credit Report
Check your credit reports for errors, even minor ones. You may be surprised how many can slip through. If you find any, call the creditor that’s reporting the error and follow up with a letter with the same request. Then notify all of the credit bureaus of the changes and let the creditors know you’ve done so. This will help motivate them to make the needed corrections.
- Raise Your Available Credit
If you ask an existing creditor for a higher limit, this can help raise your score.
- Keep Old Credit Cards Open
Do you have an older card that you’re thinking of closing? Keeping the card open can help your score. 10% of credit scores are based on history.
- Consolidate Cards
Try not to have smaller debts spread among several cards. This will not help your score. Try to consolidate smaller balances onto one card, or at least fewer cards.
- Don’t Rack Up Balances
Keeping a lower credit utilization ratio will also help your score. 30% of your limit is a good goal. That means, for example, if you have a $1000 limit, then you would keep your balance below $300.
A defaulted card can cause a lot of damage to your credit score. Try to work with the creditor to accept a partial payment for a debt in collections in exchange of reclassifying the debt as paid.
- Don’t Keep Applying for New Credit
10% of your score is affected by new credit applications. Don’t apply for a new card unless you absolutely have to.
Of course there are other ways to maintain a great credit score. But if you start with these points, you will be on your way to a better score in no time.