Realtor Loreal Greathouse Shares 7 Tips on Improving Your Credit Score

Ok so you found a good lender and you had a meeting with him/her to decide how much you can get approved for. However, you found out your credit score is too low to buy a home right now. So what do you do now? There are thousands or articles and advice on improving your credit rating. Here are some tips from me.

1. Pay your cards on time every month. Paying the minimum amount will cost you more in the long run, so if you can pay more than the minimum I strongly suggest that. My advice is to focus on paying off the card with the highest interest rate. Other people may say pay the card with the smallest balance. Either way, you need to pay more than the minimum to gain any ground.
2. Cancelling credit cards you do no use can hurt your credit score. 30 percent of your credit profile is made up of the credit history (time that you have had a particular card or loan). The longer the time since you acquired the credit card or loan, the greater positive impact it has on your credit score. Remember, not all credit cards are created equal: Many store cards (Target, Kohls, Pottery barn, etc.) carry high interest rates and often do not report to the 3 bureaus every month. When cards report with low balances, this improves your score. Having a Visa, Mastercard, Discover or American Express that you use regularly and pay off or down significantly each month helps keep your available credit high and your credit score high as well.
3. Credit card balances increase your debt to income ratio, so when preparing to purchase a home, make sure the balances are lower so that you can get pre-approved for a higher amount. Think, the higher the balance, the higher the monthly payment and the greater impact it will have on your debt ratio.
4. Never max out a credit card. It’s hard to believe, but you will actually lower your credit score if you use all of your available credit. Try to keep your credit card balances under 50% of the actual credit limit. I suggest staying around 35% of your limit if possible.
5. Some customers come to me with credit issue not because they were unwise and got into debt, but because they just don’t have any credit yet. If you are against credit cards you can build your credit a few other ways. Ask your landlord to report your rent payments to the credit bureaus so you will have a good record of paying on time, taking out a small loan for a car will also grow your credit, or try getting a prepaid visa card. You just load the card with money and it works like a credit card and helps build your credit.
6. Don’t check your credit score too often. Every time you apply for a credit card, loan, or make a score inquiry you “Ding” your credit. It’s a small amount each time, but if you do it enough you will see it affect your score. I suggest checking your credit score once a quarter. Go directly through the credit bureaus. There are a lot of websites that offer “free” credit checks. Make sure you are using a trustworthy and respectable site.
7. Lastly, if your credit is bad because of a short sale, foreclosure or bankruptcy it’s important to do all of the previously discussed things, but the main solution to your credit problem is going to be time. The effects of a Short Sale can take 2-3 years to repair where a Foreclosure can take 3-7 years.

You can reach Davidson Realtor Loreal Greathouse by calling (904) 940-5000 for any of your real estate needs.