If you’re in the market for a new home, your credit score will determine whether or not you’re eligible. Your score will determine the loan program you qualify for and your interest rate. Your credit score may be the single most important asset you have.
You spend years building your score – here are a few tips to help you maintain it.
- Make your payments on time. According to experts, a large portion of your credit score (35 percent, to be exact) is calculated based on payment history. Making your payments on time (within 30 days of the due date), every time can greatly impact your score. This includes credit card bills or any loans you may have, such as auto loans or student loans, your rent, utilities, phone bill and so on.
Consider setting up autopay when it’s available so you don’t run the risk of missing payments.
- Keep your balances low. 30%. That’s the magic number! As soon as your credit card balance exceeds 30% of your credit limit, your credit score will decrease. Your score will continue to decrease until you bring your balance below the threshold.
Experts recommend that you pay off your entire balance every month. We know that’s not always realistic, but you should always at least make the minimum payment.
- Be cautious when opening new accounts. According to Experian, “Each application can lead to a hard inquiry, which may hurt your scores a little, but inquiries can add up and have a compounding effect on your credit scores. Opening a new account will also decrease your average age of accounts, and that could also hurt your scores.”
There is one exception to this rule. If you’re shopping for a new car or home, it’s OK to shop around and have multiple lenders pull your credit. If these credit pulls occur during the same time frame, they are often ignored by credit bureaus.
- Check your credit score regularly. If you practice tips 1 – 3 but forget to do #4, you’re setting yourself up for possible risk. Mistakes are known to happen, and reporting errors can have a negative impact on your score. If someone steals your identity and opens a new line of credit in your name, how will you know if you don’t regularly monitor your score?
You are entitled to a free annual credit report from each of the three credit reporting agencies. Click here to order your free reports.
If you find a credit reporting error, dispute the mistakes with the appropriate credit reporting agency and your score may improve.
If you have additional questions about your credit score, give us a call! We’re happy to help in any way we can.