20 Jun Tips to raise your credit score to qualify for a mortgage
Many people pay no attention to their credit score as they believe (or have been told) it is just a number about your finances. While that is true, a credit score is indeed a number that represents your overall credit health, it is much more than that. It indicates how likely you are to make payments on time or default on a loan. Your score can range from 300 to 900, with 300 being the lowest possible score and 900 being the highest. (For more on this topic, click here).
So, when should you check your credit score?
If you are planning on buying a house soon, the answer is “right away”. The reason for that is simple. If there are any problems with your credit, you can start planning a strategy to correct them. If not, then it will make you feel better know you will most likely qualify for a mortgage. This post, however, is intended to help those people with a poor credit score.
What can I do to improve my credit score?
The only way you can do this is to actually build credit. You need to show you can pay your debt, however small it is. This is the reason why it is so important to have a credit card from an early age. It is also very beneficial because you don’t need to make astronomical purchases to build your credit. All you need to do is pay for small transactions on your credit card – it can be something as simple as a restaurant bill, or a bill from a clothing store. Whatever you decide to purchase with your credit card. You can also be in the form of a monthly expense, such as your cell phone bill. Simple enough, right? What matters is not the quantity spent, but the payments made when they are due. (If you can’t pay all of it at once for some reason, pay at least the minimum required).
As a next step, you should diversify your debt. In other words, besides a credit card, you should have another form of debt – a car loan, life insurance, tuition… What this does is show the potential lenders that you are able to manage different types of debt (again, when paid on or before the due date).
If you have older credit cards where you have a “payment history”, but you feel like you don’t have a need for them anymore, don’t just close them. Check the history. It will help you tremendously. Otherwise, you will have to go back to square one and start all over again. By the same token, don’t apply for too many credit cards, especially in a short period of time. That is seen by lenders as negative – it shows you are shopping for credit.
Last, but definitely not least, if you have outstanding debt, try to get rid of it in full as soon as possible. Not only are you paying a huge amount of money on interest, it is not really doing anything good to your credit score.
Remember, this process takes time. Don’t believe the “fast credit repair people”. That service is nothing but a scam. Improving your credit score is possible. Just be patient and follow these tips.