An important rule of thumb to remember regarding credit is that YOU are your only advocate for your credit. YOU are the only one that can improve your credit. YOU are the only one that can manage any errors on your credit. YOU are the only one who can determine who pulls and when your credit is looked at.
Frequently, when we move forward with a client’s application for mortgage preapproval, there are errors on the individual’s credit report (some statistics say 80%). It is a MUST that those errors are corrected immediately. Calling the credit bureau company to get those errors corrected are the responsibility of the consumer. The credit bureau company will assist you to correct those errors by providing needed information such as telephone numbers, account numbers, etc to the consumer who is questioning their report. This goes a long way in improving credit. If there are errors, they WILL negatively affect your credit score.
Improve your credit score by….
1. Paying your bills on time. Even if it is a minimum payment amount, paying bills on time is probably the most important aspect of keeping your credit healthy. A late payment ALWAYS significantly lowers your credit score.
2. Try to keep your credit card balances within 30% of the maximum allowable credit. Banks always consider the amount of debt you have. If you can’t manage your credit card debt, the bank will doubt that you can manage mortgage debt.
3. Don’t apply for credit on a frequent basis. Some stores market their credit card applications every time you go through the cashier’s check out. Keep in mind that marketing is a big part of credit and the high interest rates that you will pay on remaining balances will be far more negative than the 3% cashback that is being offered.
4. Don’t close old credit accounts. Keep the older credit around. The lender will always look to see how old and established your credit is. The older, the better.
5. Don’t pull your credit too often. Although credit pulls for mortgages, automobiles, and student loans is looked at differently than credit cards, it is important to keep credit pulls to a minimum. The more applications to credit cards, the lower your credit bureau score goes.
6. If you are going to make a purchase that will require more credit, it is better to call the credit card company and increase your credit limit than make a purchase that goes over your credit limit. If you go over your credit limit, this will significantly affect your credit score to the negative.
7. If you enter into a dispute with a company, it is better to make a payment and close the account than close the account forcing the company to go to collections. Be very careful when online shopping as it is very difficult to reconcile a dispute when there is little physical presence. Make sure you know who you are shopping from when making purchases online.
8. Don’t buy too much on credit at one time. If you go out and buy a car, buy a cellphone and then apply for a personal loan, the credit bureau sees this as financial instability and your score will be lowered. Even getting a preapproval from a bank will lower your score.
9. Make sure your credit bureau has no mistakes or continuing collections. When you call in to make sure your credit score is accurate and something comes up such as collections for a cable company, make sure to get the contact information from the credit bureau company and call the collections to settle the payment as soon as possible. As well, get the collections company to call the credit bureau to mark the account as “paid” and even remove the notification entirely.