Improving Your Credit Score

By
Mortgage and Lending with ResMac Mortgage

Thinking of buying a home but concerned your credit isn't the best? Many potential homeowners find themselves in this exact same situation. There are ways to improve your credit though, and steps you can take right now to work towards improved credit scores.

Opting-Out

One thing you can do immediately to potentially improve your credit score involves opting out of prescreened credit offers. Potential creditors routinely access  your credit report to determine if you might qualify for a new loan or credit card. While this access is not considered a hard credit pull, it may still impact your credit scores.

Protecting your private information and preventing this access is quick and easy. Click here and complete the necessary forms to permanently opt-out of access by unauthorized creditors

Active Credit

Having active and current credit is very important when it comes to determining your credit scores. Active accounts include car loans, credit cards, secured/unsecured loans, and any other type of creditor that reports to the three major credit agencies. Typically you want to have at least three active accounts to maintain a healthy credit score and profile. A common misconception is that a closed account is better than an open account without a balance. Once a creditor or individual closes an account, there is no longer current and active data to rate against. Therefore it is very important to have the account remain open, even with a zero balance.

If you currently do not have any active credit accounts, you will need to obtain them. If your credit scores are low, you will most likely only qualify for secured credit cards. These require an initial deposit that determines your credit line from which you borrow against. Click here for a link to more information on these. Re-establishing active credit is a very important step in increasing your credit scores.

Active Credit Balance

Another important piece of the puzzle involves the relationship between active credit balance and the account limit. The lower the actual credit in use is, the higher the credit score. For example, let's say you have a credit card with a limit of $500, and your current balance is $500 on that account. When the credit agencies rate your credit and generate a score, this balance says you are overextended and not managing your credit properly, directly translating into lower credit scores. Before applying for a new mortgage, paying down your current account balances will insure you generate a higher credit score.

Collections and Late Payments

Collections and late payments to creditors can drastically reduce your credit score and these should be avoided at all costs. What can you do though if you have had a late payment or collection? It is important to note that a collection is rated the same whether it has a high balance or a zero balance; in fact paying a collection can seriously reduce your credit score. Before paying, it is important to consult a credit expert who can guide you in the correct direction. We recommend contacting a member of our staff if this is your situation.

Credit scores impact many areas of our lives. The lower your score is, the more you pay for credit, car insurance, etc. ResMac is here to help point you in the right direction and assist you in becoming a homeowner. We have many programs that specifically finance lower credit score buyers as well. Please contact us for details at 800.917.7002 or info@res-mac.com.

 

Comments (1)

Victor Zuniga
Berkshire Hathaway Home Services California Properties - San Diego, CA

Matthew,

These are all very good tips for helping your credit score.

Thanks for posting them.

Feb 07, 2012 02:58 AM