Your credit score dictates your options when it comes to getting a mortgage, but a low credit score shouldn’t deter you from buying the home of your dreams. Especially if you don’t plan to purchase a home right away, it’s good to be proactive and work to better your score.
Here are 10 tips to help give you a boost!
Pay your bills on time
Paying your bills on time and consistently is key to keeping your score up. Payment history is the single biggest factor of your credit score. A great way to do this is to set automated payments at a designated time every month so you'll never have to stress about it!
Make frequent payments.
Often called micropayments, it’s beneficial to make several smaller payments than to make one large one. In the world of credit scores, two bi-weekly payments of $150 are better than one payment of $300. This is because your lenders see this as making more than one payment even though it is the same amount collectively.
Don’t close unused credit cards
Closing a credit card means that the credit limit affects your credit utilization, which is a part of how your CS is calculated. So closing a card can lower your overall score. It's better to keep the card and use it occasionally so it will remain open.
Don’t apply for too many credit cards at once.
While having numerous credit cards does not affect your score as long as you keep up with them, applying to many (more than 2 or 3 at once) at the same time may raise a red flag to future creditors and affect your credit score.
Ask for higher limits.
When your credit limit increases and your balance stays the same, it lowers your credit utilization, which can benefit your credit! When you call your card issuer, ask for a higher limit without a “hard” credit inquiry.
Try to have a mix of credit such as credit cards and a line of credit
If you only have a credit card it may be beneficial to mix up the types of credit you have. This could be in the form of a bank loan or car loan. Doing this will boost your creditworthiness because it will show that you have experience with borrowing.
Keep usage under 35% of your available credit
While this factor does not make or break your credit, it’ll help your score because it affects how your credit utilization is calculated.
Don’t skip a payment even if a bill is in dispute.
This goes back to how consistency is key. Your score doesn’t see if there was a dispute but rather how consistently you are making payments.
Make sure you check your reports yearly and dispute any inaccuracies.
You can check your credit report for free every 12 months using Equifax, Experian, and TransUnion. This allows you to see if any errors could be pulling your score down.
Use a secured credit card
A secured credit card is perfect for people trying to raise their credit score or build it from scratch without the scary negatives of a traditional card. This type of card is backed up by a cash deposit which is usually about the same as your credit limit. You use this as a normal credit card and when you make payments on time it is an affordable and less risky way to boost your credit.