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September
2
2
Buying a House: How Do I Raise My Credit Score?
Buying a home is probably the biggest investment you'll make in your lifetime. A good credit score shows lenders you're a good risk for a mortgage. Not only are you more likely to be approved, but you'll also qualify for the lowest interest rates, which will save you thousands of dollars over the life of the loan.
Is your credit score lower than you'd like it to be? Fortunately, it doesn't have to stay that way. Our real estate agents share their top tips for safely raising your credit score.
- Monitor Your Credit Reports
No one's perfect, including credit reporting agencies. Even a minor error, such as a transposed number, can make a significant difference in your total score. Request copies of your credit report from each of the Big 3 agencies (Equifax, Experian, and TransUnion) and review them carefully. Register a dispute for any mistaken information you find. - Set Up Automatic Payments
Timely payment history is the single largest factor that makes up your credit score, accounting for 35 percent. Most creditors offer automatic electronic payment systems to eliminate the possibility of missing a scheduled date. - Reduce Overall Debt Total
The credit utilization ratio is a measure of total outstanding debt versus available credit. This element makes up 30 percent of a credit score, so paying down open balances is one of the quickest and easiest ways to improve your score. Focus on accounts with high-interest rates as well as ones close to maxing out. - Manage Credit Wisely
Are you tempted to open several credit card accounts to boost your score? Multiple credit report inquiries in a short amount of time actually have the opposite effect. Closing unused accounts is also a bad strategy as it immediately increases your credit utilization ratio. - Open a Secured Credit Card Account
An exception to the idea of not opening new accounts is if you have seriously bad credit or none at all. Secured credit cards are similar to debit cards in that they draw on the money you have deposited into the account, but unlike debit cards, they count toward your credit score. - "Piggyback" on Another Credit Score
Do you have a family member who uses credit responsibly? Ask if they would make you an authorized user on one of their accounts. This person doesn't have to actually give you access to the account, but their good credit history will be reflected in your score as though you were using it. - Take Out a Credit-Builder Loan
As the name implies, credit-builder loans were created specifically to give people an opportunity to raise their credit score. Banks, credit unions and other financial institutions deposit money into a savings account for you. After paying the amount back in regular installments, the funds are yours. If you decide to apply for a credit-builder loan, be sure to shop around as terms vary. - Consolidate Debt
Consider taking out a consolidation loan you can use to pay off multiple accounts and reduce debt to a single source. In addition to lowering your credit utilization ratio, consolidation loans usually carry lower interest rates than credit cards. - Incorporate Utility Payment History
Earlier this year, Experian rolled out their Experian Boost program which applies utility payment history to your credit record. Experts estimate an instant 20 to 30 point increase in your credit score, assuming your utility payment history is clean. Keep in mind this is reflected only in reports from Experian.
Navigating financial ins and outs of selling or purchasing a home can be confusing. Contact us at Counselor Realty for experienced and professional help with your Twin Cities real estate needs.