April 6th, 2015 7:08 AM by Jackie A. Graves, President
When you are ready to buy a home, your lender will take a long
look at your credit scores. Those numbers will play a big part in the terms the
If you have bad credit, you may struggle
to get approved at all. Even if you have fairly good credit, a few points could
mean a difference of thousands of dollars of interest. Boosting your credit
score before you apply for a loan can help you get a better rate, and there are
a few ways to pull it off.
A recent study by the Federal Trade
Commission found one in five
consumers had at least one error on a credit report. Some of those errors were
big enough to damage the consumer’s credit score. The good news: The credit
bureaus have to investigate and remove or correct any errors you find.
Order a copy of your credit reports from all three credit
bureaus—Equifax, TransUnion and Experian. By law, you are entitled to a free
copy every year through AnnualCreditReport.com. Once you have the
credit reports in hand, comb through them and dispute any errors you find with
the bureau responsible. The credit bureau has 30 days to investigate and remove
While any debt has an impact on your credit scores, credit card
debt is weighted more heavily than revolving debts such as student loans or
auto loans. Paying down your credit card debt can boost your credit scores.
Most experts say you should aim to keep your credit card debt at no more than
10% to 30% of your available credit limit.
Under the FICO model, bill payment history accounts for 35% of
your credit score. Even one late payment is enough to drag down your scores,
but you may be able get the black mark removed simply by asking your creditor.
Known as a “goodwill deletion,” the creditor may be willing to remove the late
payment information if you have an otherwise spotless history with the company.
However, creditors aren’t usually willing to do this if you have a history of
If you are working on improving your credit scores before you apply for a mortgage, you may be tempted
to cut up your old, unused credit cards and close the accounts. Don’t! That
will backfire. The length of your credit history accounts for 15% of your
credit score. By closing your oldest accounts, you are shortening your overall
account length, which will only hurt your credit score. Instead, once you pay
off a credit card, tuck it away in a drawer and keep the account open to keep
building on your credit history’s length.
Once you have taken steps to lessen the damage of your past, do
not let history repeat itself. Aim to pay all of your bills on time each month.
Every timely payment you make will add to the positive history on your credit
report. Over time, you will see your scores improve across the board.
By: Angela Colley | Laura
Sherman contributed to this article.
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