November 23rd, 2016 9:37 AM by Jackie A. Graves
So, you’ve decided next year is the year you’re finally going to buy a
house. Congrats! But now you’re a little panicked because your credit score
isn’t exactly going to make lenders swoon.
You’re not alone. The
national average credit score is 695,
while only half of consumers fall in the desired 700-plus range.
Although you certainly can get a mortgage with that score, you’ll need a
740 or higher to get the best rates. And
that point is not lost on potential home buyers, 45% of whom wait for their credit
scores to improve before
applying for a mortgage.
While credit history isn’t
built (or, for that matter, destroyed) overnight, there are still some things
you can do right now to boost your credit score—fast. Here are some sneaky
yet totally legit ways you can improve that all-important three-digit
number in record time.
Paying down your debt is the
thing you can do that could have the biggest—and fastest—impact on your credit.
Credit utilization (or the amount you can borrow versus the amount of debt
you’re carrying) accounts for 30% of your credit score. And the more available
credit you have, the better.
If you have the cash on
hand, try to time your payments so you’re reaping the credit-reporting
“The easiest way to
optimize your utilization is to use a credit card and pay your balance down to
1% of your credit limit right before your bank reports to the credit bureaus,”
says Liran Amrany, founder
and CEO of Debitize, a financial technology company that
automates better money and credit habits. “You want to have positive
utilization so it’s clear you are using the card, but otherwise want to be as
low as possible,”
Not sure when your creditor
reports? You could call them up and ask, or you can check your credit report.
According to Amrany, you want to pay before the date last reported.
time for improvement: One
You hopefully already know that
you have to pay your bills on time to get a good score. If you’re already
late on a payment, pay that puppy ASAP for a quick credit boost.
“Because paying bills on time
is the most important factor in a credit score, going from paying one or more
bills late each month to paying all on time could show an improvement in one to
two months,” says Kevin
Gallegos, vice president of Phoenix operations for Freedom Financial Network.
Bonus: If you’re less than 30 days late and
you can make the payment today, do it! Creditors don’t typically report until
after the 30-day mark.
time for improvement: One to
Opening a new credit account
can help in two ways.
First: “If you open up a new
card, which increases your total outstanding credit line, your utilization
should improve,” Amrany says.
Second: If you have only one
type of credit card or a small loan, opening another type (like a store card)
can help your “credit mix,” a term the credit bureaus use to indicate
whether a person can handle different kinds of accounts.
But don’t go nuts—try opening
just one new account, at least at first. If you apply for a card every
time you’re asked whether you want 10% off your purchase today, you’ll take a
hit on the number of recent inquiries . And that won’t look good.
time for improvement: One to
six weeks, based on processing and reporting your new account
Have a responsible partner or
family member? Becoming an authorized user on one of their accounts will let
you piggyback onto their good credit history.
“The full history of the other
account shows up on your credit report immediately,” Gallegos says. “And when
this older, established credit account is added to your credit history, it
results in an increase in the average age of accounts you’ve ‘managed’ (which
also increases your credit score).”
Just be careful to make sure
the person you choose actually pays his bills on time and keeps the debts
low—just like good credit history, bad history will show up, too.
time for improvement: Immediately
A popular credit-boosting myth
says you can add to your credit history (and improve your score) by calling
your other providers—like your wireless provider or utility company—and asking
them to report your payment history to your credit report. It
sounded like a pretty good deal, so we asked the experts about it.
“Each of the major
credit-reporting agencies is making some changes to include more bill payments,
albeit slowly. In general, though, most of the time, these types of payments
only appear on credit reports when they are delinquent,” Gallegos says.
So, that one probably won’t
work in your favor, but there are still plenty of things you can do now. House,
here you come!
By Angela Colley - To view the original article click here