Logan Utah Real Estate - Mortgages: How do I increase my credit score?

Mortgage and Lending with Bank of Utah

If you are looking to purchase a home and get a mortgage, your credit score may be the difference in obtaining a decent interest rate and/or being able to get a loan at all.

If you are looking to get an FHA loan you will need at least a 620 credit score with most lenders. The good thing about FHA is that the interest rates are not
"credit score driven", meaning that the interest rate won't be determined by your credit score.

On the other hand, If you are shopping for a conventional loan then your credit score becomes even more important. In the past a credit score of 680 would demand the best interest rates. Now days you really need a credit score of 740 to get the best rate.

So what if your credit score is less than 740? What can you do to get it higher? Every credit profile is different and a good loan officer should be able to look at your credit report and help you set specific and unique goals to improve your credit score. But the principles are the same for everybody.  They are...

         1. Make your payments on time!  This is an obvious one but this is the single most important thing to improving your credit. If you have late payments on your credit report, make the goal to never have a late payment ever again and your scores will start to rise as time passes. Time heals all wounds.

         2. Improve your balance to credit limit ratio. If you have credit cards that are maxed out, you are hurting your credit score tremendously.  Ideally, you don't want to use more than 40-50% of your credit card limits. One strategy is to ask the credit card company to increase your limit so as to lower ratio. However, this can be risky if you don't have the discipline to abstain from using that credit card.

        3. Manage and protect your golden accounts. On your credit report, some accounts are worth more than others. For example, a mortgage is by far the most significant credit account. Make your payments on time and it will help your score tremendously. Have a late payment and look out below!...Sub-500 here we come! Department store cards (e.g. Macy's, Best Buy, etc.) are the least significant and usually hurt more than help.

When I was in elementary school my dad use to give me $2 for every A on my report card, $1 for every B, nothing for a C, and I had to pay him $5 for a D and $10 for an F. Your credit report is much the same as a report card, but of your financial behavior. You will be rewarded with great interest rates for a good credit score.

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About the Author

John Neil is a loan officer that is passionate about his profession. His goal with every transaction is to make a customer for life. The result is that 95% of his business comes from referrals of satisfied clients. If you need a cache valley mortgage, you can contact John at 435-770-2709. You can also follow him on twitter @LoganUTMortgage or facebook @facebook/MortgageNerd


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