With a high credit score, the world is your oyster! At least when it comes to qualifying for a home loan. A good credit score can get you a better interest rate on your home loan and makes the entire homebuying process smoother. We have gathered a list of proven ways to raise your credit score according to myFICO.com, one of the leading credit reporting bureaus.
1. Pay Your Bills on Time
Though it may seem like a no-brainer, paying your bills on time is one of the most effective ways to raise, and maintain, a solid credit score. Payment history accounts for 35 percent of your FICO score, making it the largest factor in your score.
2. Keep Your Credit Card Balance Low
Amounts owed make up 30 percent of your FICO score. Any amount of outstanding debt on a credit card can negatively impact your score. In order to keep a good score, it is best to keep your outstanding balance as low as possible. If you have multiple outstanding balances, it’s best to pay off the accounts with the highest interest rate first, even if the balance is lower. You can then use those extra savings from avoiding the accruing high interest to pay off the accounts with lower interest rates.
3. Don’t Open Multiple Credit Cards at Once Just to Build Credit
Many people assume that having more available credit will increase their credit score, but this approach could potentially lower your credit score. Opening too many credit cards in a short period of time can cause undue stress and requires more attention than having only the credit cards you need. It’s important to open credit cards on an as-needed basis, as this will make it easier to keep track of your accounts. Also, rapidly opening accounts can look risky to credit score bureaus. It lowers the age of your credit history which lowers your overall credit score.
4. Keep an Eye on Your Credit Score
It is a common misconception that checking your credit score can lower it. If you request a credit report directly from the credit bureau you’re using, it will not affect your score. Watching your credit score can be a calming experience on your journey to financial literacy and independence.
5. When You’re In Real Trouble, Contact a Professional
If you get into the thick of things and are having a hard time with your credit score, contact a local credit professional like Epic Credit Solutions, who work with a law firm to help their clients remove negative events on their credit reports or Financial Guidance Center who helps people develop debt management plans to help them achieve their financial goals.
Raising your credit score may be the first step in your journey to homeownership and all the glorious opportunities, freedoms and responsibilities that come with it. The best way to raise your credit is to not let it slip.