08 Jan Credit Score Resolutions for The New Year
How to Improve Your Credit Score
It is only a three digit number, but your credit score is an incredibly important number in your financial life. It helps lenders decide how likely it is that you will repay on time if they deem it wise to grant you a loan or credit card. The higher your credit score the more likely you are to qualify for credit cards and loans and at the best terms – which in the long run will save you money.
If your credit history isn’t what you want it to be, make a new year’s resolution to start the process of improving your score. It takes time but the sooner you start addressing the issues that are causing you stress and strife, the faster it will go up. This is especially important when you are starting to think about purchasing a new home. Your current score is one of the most important things used in determining if you will be approved for a home loan. First, you will want to make sure you know what your credit score is.
Follow these steps to start improving your credit score:
- Pay All Bills on Time: Lenders that are reviewing your credit history are very interested in how reliably you pay your bills. This is because past payment performance is generally thought of a good indicator of future performance.
- Pay off Debt and Maintain Low Balances on Credit Cards: Another important factor in credit scores is the credit utilization ratio (calculated by adding all credit card balances at any given time and dividing that amount by your total credit limit). Lenders are generally looking for low ratios of 30% or less.
- Be Wise About New Credit: Opening new credit cards can raise your overall limit but it also adds an inquiry on your report. Also, do not open new accounts just to have a better credit mix because it probably will not improve your score.
- Dispute Any Errors on Your Credit Report: It is important to review your credit reports at all three credit reporting bureaus for mistakes as incorrect information on your report may bring down your scores.
Improving and rebuilding your credit doesn’t happen overnight but it is an important part of preparing to purchase a home. Time is really your best ally in making improvements.
If you are interested in discussing your goals for your current home to see if a refinance for your home mortgage is a good idea or a new home is in your future, please reach out to one of our local mortgage planners at Fairway Independent Mortgage of the Carolinas. They are happy to review your financial options with you. We are truly interested in providing a mortgage experience that will set the stage for your financial future. Our goal each day is simple – help people do better in life. Let us change the way that you think about mortgages.