Ask the Expert: Concerned About Your Credit Score?November 4, 2016, 11:35 AM HST · Updated November 4, 2:34 PM 1 Comment
Q: Credit Score Got You Concerned?
A: If you’re worried about your bad credit, you’ll want to do everything in your power to improve your rating as quickly as possible—especially if you are looking to purchase a home in the near future.
Improving your credit rating can give you access to better interest rates on mortgages or even help you to get that job you’re after.
Important! If you are currently involved in a home loan transaction, speak with your trusted mortgage lender before taking any action regarding your credit.
So how can you boost your FICO score quickly and easily? Here’s what you need to know.
Here are three ways to get it together:
1. Get your credit report and dispute any errors
Credit reporting agencies don’t always keep 100% perfect records and there’s a good chance that your credit report contains at least one error.
One recent FTC study found that 25% of consumers have an error on their credit report and that in 5% of cases, the errors were actually severe enough to impact the loan terms that borrowers were able to negotiate.
You can get your annual credit report from all three credit reporting agencies for free. Carefully read it over. If you see any errors—if your name is misspelled, if they have the wrong address on file, or if there are late or unpaid charges that you didn’t make—you can dispute the items in question.
2. Try maintaining a lower utilization ratio
Your debt-to-credit ratio (also known as your utilization ratio) is one of the most important factors that determine your credit score.
It measures the outstanding balance on your accounts in relation to the total credit available to you, which helps lenders assess your capacity to take on new debt.
If this number goes beyond 30%, you’ll start to see your credit score drop. Ideally, you should aim for a utilization ratio below 10%. This will prove to your lender that you can responsibly pay for the credit you use.
3. Have recurring bills? Automate your payments
Automating your monthly payments can be a great way to boost your credit score.
Whether it’s your mortgage, your credit card, or your student loan, a pre-authorized monthly payment will ensure that everything gets paid on time and give you a great credit history.
Your FICO score is a number that will determine your eligibility for mortgages and other loans.
These are general tips to help with your credit score and improve the overall reporting of your credit.
Reach out to one of the mortgage professionals at Mason-McDuffie Mortgage to learn about what kind of mortgage your credit score can afford you.