October 5th, 2015 6:24 AM by Jackie A. Graves, President
Here’s how to clean up your credit so you get the least-expensive
home loan possible.
Boost your credit score by paying the balance on your credit cards
in full, and on time, every month.
Getting the loan that suits your situation at the best possible
price and terms makes homebuying easier and more affordable. Here are seven
ways to boost your credit score so you can do just that.
Credit scores range from 300 to 850, and the
higher, the better. They’re based on whether you’ve paid personal loans, car
loans, credit cards, and other debt in full and on time in the past. You’ll
need a score of at least 620 to qualify for a home loan and 740 to get the best
interest rates and terms.
You’re entitled to a free copy of your credit
report annually from each of the major credit-reporting bureaus, Equifax, Experian, and TransUnion. Access
all three versions of your credit report at www.annualcreditreport.com. Review them to ensure the
information is accurate.
If you find mistakes on your credit report,
write a letter to the credit-reporting agency explaining why you believe
there’s an error. Send documents that support your case, and ask that the error
be corrected or removed. Also write to the company, or debt collector, that
reported the incorrect information to dispute the information, and ask to be
copied on any materials sent to credit-reporting agencies.
You may be surprised at the damage even a few
late payments will have on your credit score. The easiest way to make a big
difference in your credit score without altering your spending habits is to
diligently pay all your bills on time. You’ll also save money because you’ll
keep the money you’ve been spending on late fees. Credit card or mortgage
companies probably won’t report minor late payments, those less than 30 days
overdue, but you’ll still have to pay late fees.
Another good way to boost your credit score
is to pay your credit card bills in full every month. If you can’t do that, pay
as much over your required minimum payment as possible to begin whittling away
the debt. Stop using your credit cards to keep your balances from increasing,
and transfer balances from high-interest credit cards to lower-interest cards.
Credit rating agencies also consider the
length of your credit history. If you’ve had a credit card for a long time and
managed it responsibly, that works in your favor. However, opening several new
credit cards at once can lower the average age of your accounts, which pushes
down your score. Likewise, closing credit card accounts lowers your available
credit, so keep credit cards open even if you’re not using them.
Credit scores are also based on how much
credit you use compared with how much you’re offered. Using $1,000 of available
credit will give you a lower score than having $1,000 of available credit and
using $100 of it. Occasionally opening new lines of credit can boost your
available credit, which also affects your score positively.
It can take time for your credit score to
climb once you’ve begun working to improve it. Keep at it because the more
distance you put between your spotty payment history and your current good
payment record, the less damage you’ll do to your credit score.
How FICO scores are calculated
Answers to frequently asked
credit report questions
G. M. Filisko – To view the original article click here