Whether you’re looking into buying a home soon or will be considering it in the future, it’s smart to stay on top of your credit score. Not only is your credit report important for obtaining a low interest rate, but a good one is essential if you want to qualify for financing. The goods news is that, even if you’ve had some problems in the past, there are ways to strengthen your credit score in advance of making a large purchase. Here are a few simple tips on how to do it.
Keep a close eye on credit card balances. One primary number that factors into your credit score is how much you have compared to how much you use. Try to maintain a 30 or lower utilization ratio, i.e., use about 30% of your available credit to avoid a negative impact on your score.
Run your credit a few months before you plan to buy a home or car. If you in a position where you can plan in advance, obtain a copy of your credit report about six months before you intent to make a large purchase. This will give you time to repair your credit or take other actions as mentioned below.
Contest incorrect information on your credit report. If your credit report reveals information that you feel is inaccurate for some reason, you can go through proceedings to have the errors removed. Each credit bureau has different procedures for doing so and the creditor will have a chance to respond to your allegations.
Pay your bills in full and on time. You should make sure to keep up on payments for all accounts in your name, including credit cards, store credit accounts, utilities and medical bills. Your payment history comprises 35% of your FICO score, whether you pay late or miss a payment entirely. The best way to keep up is to automate your payments.
Protect yourself against identity fraud. You should keep watch over all your financial information for any indication that your identity has been compromised. This means looking for unusual activity on your monthly statements and obtaining your credit report roughly once every 12-18 months.
Request a higher credit limit. You can ask your card issuer to increase your balance limit in order to improve your credit score, but this tactic should be used wisely. Don’t increase your spending just because your limit is higher.
Obtain credit from a variety of sources. Vary the credit accounts you maintain to boost your rating, such as taking a personal line of credit from your bank in addition to using your card. You could also buy furniture or appliances on an installment contract.
A good credit rating is critical if you’re buying a new home, but it’s also smart to strengthen your credit if you’re planning on any big-ticket purchases in the near future. Your score could be the difference between a great interest rate and a poor one – and it could decide whether you’re even eligible for financing at all. If you have questions about your credit and would like to know more about building a better score, talk to a financing professional.