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How You Can Improve your Credit Score

By
Real Estate Agent with Long & Foster - Wayne/Devon, Pennsylvania

Money magazine had a great article on credit in its September issue. Many people on the Main Line, who are interested in real estate, ask me if it is hard to get a loan these days and the answer is “no” if you have a good credit score. What is a good credit score and how can you keep it high? FICO is the most used credit rating system. The top score is 850 and the lowest is 300. “You need a 750 or better today to have the same treatment you got with a 700 two years ago,” says John Ulzheimer, president of consumer education at www.Credit.com. The higher your score the better the interest rate you are able to obtain for a mortgage. To achieve the best rate, you need to do the following:

1. Know your score.

You have three FICO scores based on the information at the three credit bureaus: Experian, Equifax, and TransUnion. You can obtain a reflective score at myfico.com for $16 or you can receive an estimate for free at Creditkarma.com. You can get the history report that your score is based on for free at www.annualcreditreport.com. You are legally allowed one free credit report from each bureau annually.

2. Look for Errors

If you find a mistake notify the bureau (they have instructions on their websites) and have it corrected. Make sure your credit line amounts are correct and that none of your accounts have been marked late or delinquent in error. You could raise your score by 200 points, says Ulzheimer, just by having a mistake corrected.

3. Don’t be Late on Your Payments

Your payment history makes up the largest portion of your credit score. One late payment can cause 100 points to be taken off your score. Your payments aren’t recorded as being late until you are 30 days past due. If you make a payment 30 days past due and then pay on time after that, you should be able to get most of your points back. Being 90 days past due can affect your credit score for years so be very careful.

4. Follow the 20% Rule

The second largest factor that makes up your credit score is how much you owe compared to how much credit you have available. Credit card balances and their available lines of credit are something that you can control. You need to keep the ratio at 20% or less overall to maintain a high credit score as well as for each individual card. This is known as your credit card utilization rate. People have become very concerned over banks cancelling cards and lowering credit limits since it can really affect your credit score. If your rate becomes higher than 20% then you will need to pay off some of your debts or obtain another card to increase your credit limit since just a utilization rate of 25% could decrease your score by 50 points. However, don’t get a new credit card if you are planning on applying for a mortgage soon.

5. Keep and Use your Oldest Credit Cards

15% of your score is based on the length of your credit history. The longer you can show that you have been able to manage credit card debt the better for your credit score. Don’t cancel your cards and use them periodically so credit card companies won’t cancel them on you.

While there are other components that make up your credit score, thesa are not as easily controlled, so just concentrate on the ones that you can and you should be okay.

Regards,

 

Sarah

Visit me at www.SarahSellsTheMainLine.com

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Show All Comments Sort:
Lanre-"THE REAL ESTATE FARMER" Folayan
ERNAL REAL ESTATE GROUP with Samson Properties - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

One late payment can cause 100 points to be taken off of your credit score-Wow! I definitely didn't know that. People need to know about this. Thanks for sharing. Great post.

Sep 14, 2009 10:58 AM
Monica Snipes
BML Properties Realty - Washington, DC
Austin, Helping Buyers & Sellers in Metro Washington, DC

Excellent and concise post, but as always people will overlook each advice prescribed to them until it is too late!

Sep 25, 2009 06:59 AM