Before you can buy a home or refinance your existing mortgage, you must have a good credit history. Lenders want to see an indication that you are financially responsible and have a history of paying bills on time.
Your credit score ranges from 300 to 850 and is determined by factors like the type of credit you have, payment history, and the length of your credit history. This can affect your eligibility for a loan, mortgage interest rates, and your ability to refinance, among other things.
Low credit scores are caused by:
- Late or missed payments
- Too many lines of credit
- No credit history
- Too few types of credit
If your credit score is in need of improvement, follow these four tips:
Always Pay All Of Your Bills On Time
The easiest way to improve your credit score is to pay all credit card and loan bills on time. On time payments are updated on your credit report and will improve that part of your credit score. Setting up Auto Pay on your bills where possible is a great way to make monthly payments on time, each time.
For credit cards, make sure the balances are kept as low as possible. If you cannot afford something, save up for it and use that to pay the balance on the card down. It’s also recommended to avoid high-interest payment plans and credit cards.
Check your credit report for errors
Errors on your credit report can and will lower your credit score. Order your free credit report and review for errors like:
- Accounts that aren’t yours
- Inaccurate personal information
- Information older than seven years
Under the Fair Credit Reporting Act, “both the credit reporting company and the information provider are responsible for correcting inaccurate or incomplete information in your report.” Keeping accurate records will help you dispute claims or errors and you have the right dispute and get them corrected.
Request The Removal Of Negative Entries
If your credit report has negative entries that have been paid off, request that they be removed. These could be an unpaid collection account that has been paid off or a late payment. While this type of removal can take more time and effort, it is worth it to help improve your credit score.
Avoid Opening Unnecessary Lines Of Credit
Avoid opening unnecessary lines of credit. Each time you request to open a line of credit, an inquiry is made into your credit. Too many credit inquiries, known as hard inquiries, can negatively affect your credit score.