In the mortgage world, you credit score is a HUGE determinate of what your interest rate and loan program will be. Your credit score shows lenders how responsible you are with your money. Quick rule of thumb: The higher your credit score, the lower interest rate will be.
Here are a few tips to boost your credit score this year!
We are all human, and sometimes we forget. Since we are now in the process of improving our credit, no more excuses. Paying bills on time is single-handedly the most important aspect to keeping your credit at an excellent score. Having multiple late payments on your credit report is one way to tank your credit score, fast.
Right now, your main goal is to get up-to-date on your bills and stay there. It is 2020, so utilize your smart devices. Set reminders on your phone, email calendar, online banking portals, etc. This will easily help you remember to pay that monthly bill that tends to sneak up on you.
One way to not have debt, is to not create it unless it is necessary. One component of how your credit score is calculated is based on your overall credit limits and how much you are using. AKA – don’t max out your credit card as soon as you get it! If you do find yourself in a situation where your cards are nearing their limit, decide which cards have the highest interest rates and focus on paying those off first.
Once you have identified which accounts are the most important to pay down first, create a payment plan that you can follow with ease. Again, back to the smartphone age…use it to your advantage! Another way to stay on top of things is having payments on auto-draft.
We all know how easy it is to fall into the “sign up now and save 20% on this purchase” gimmick at your favorite store. If a new home or refinance is in your near future you need to always put that first. Opening new lines of credit prior or during a mortgage transaction can make things very complicated. When you open a new account, it shows as a hard inquiry to your credit, in turn decreasing your scores.
You may think closing old accounts you don’t use anymore would be beneficial, but its actually the opposite. Closing an old or inactive account can seriously hurt your score because it shortens the length of your credit and adds to your credit utilization. So always keep in mind, a long-gone credit card goes a long way in keeping your score up!
300-579 – Very Poor
580-669 – Fair
670-739 – Good
740-799 – Very Good
800-850 – Excellent
Take a look at our checklist to see the basic documents you’ll need to apply.