Steps to Improve Your Credit Score

Real Estate Agent with The Real Estate Power Houses

Lenders analyze your credit score to determine whether or not to approve a home mortage.

Before lending you money, creditors want to determine how much of a risk you are-in other words, how likely you are to repay the money they loan you. Credit scores help them do that, and the higher your score, the less risk they feel you'll be.

 It's important to note that raising your FICO credit score is a bit like losing weight: It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time. You can save money by just following these tips and raising your credit score.

  1. Know and Track Your Credit Score- You can get the free MyFico 30-Day Trial of Score Watch which will tell you your current score and alert you if there are any changes.
  2. Never Miss a Payment, Starting Today- So you might not have had the best track record, but if you can keep your credit clean from now until forever your credit score will raise over time by itself! You can pay your bills online or use a direct deposit payment so that you never miss!(+100 pts).
  3. Never Use More Than 30% of Your Available Credit- This is one of the lesser known tricks to credit score building. If you have a $1000 credit limit on one card, only use a maximum of $200 on it. This rule applies to every card you have.(+15 pts).
  4. Keep Credit Cards That Have No Annual Fees Open For as Long as Possible- The length of your credit history is a good indicator for your short term performance on paying a bill or loan. So, even if you're trying to resist the temptation of using your cards, do not close them. Cutting them up is ok. (+25 pts).
  5. Get New Ones- This has to do with tip #3 there, it's better to have more available credit on one card, then to have it spread around multiple cards. Besides, it's just easier to keep track of, and it will help you not miss your bill cycle. (+10 pts).
  6. If You Think You Are Going to be FORCED to Pay a Bill Late Ask for an Extension or Payment Plan -Avoid getting a negative mark on your credit report, however possible. Beg, plead, make a deal. Once they bring out the smudger, your credit is smudged. Save yourself a major hit, negotiate new payment terms, refinance, - they really just want their money, but some credit places out there are dirty and tricky. Try try, and save yourself 15 points. Remember each hit is compounding negatively against your FICO points! This is a Plan B for those days where you forgot to follow trick #2(+15 pts).
  7. Take out a Small Personal Loan and Repay it Over a Year-Tricky, but it works. Take out a loan for say $1000 and pay the balance off over the course of the year. If you pay every month on time you will start to build a credit history. (+10 points).
  8. Have At Least Three Revolving Credit Lines-You might consider to have all four of the major credit cards such as Visa, Mastercard, Discover and American Express. The idea behind this is that creditors want to see thay you can manage multiple accounts. (+10 pts).


Comments (3)

Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Jese, these are great tips.  I plan to bookmark this one and share i with clients.

Oct 27, 2008 04:14 AM
Chuck Willman
Utah Homes - Alpine, UT
New House Utah - Utah Hero Homes

Jese- This is very good info. It's amazing how much a slight change in credit score can influence the cost of a loan... especially these days.

Oct 30, 2008 07:29 AM
Jese Gonzalez
The Real Estate Power Houses - El Paso, TX
The Real Estate Matchmaker

Patricia and Chuck--I have personally followed these steps (which is why I blogged about them) and it is surprising tom see how my credit score has jumped! With the way our economy is nowadays, I pass this information to all my buyers. Ever bit helps!

Nov 03, 2008 02:51 AM